I sat down with my Dad to talk about how an investor can invest in private mortgages. As president of a Mortgage Investment Corporation (MIC) and with over 35 years of experience, he has a lot of insight into the world of mortgage investments. Essentially, there are 3 ways to invest in mortgages:
1. Invest on a one on one basis. The mortgage is written in the name of the investor and all interest payments go directly to the investor, usually on a monthly basis. The caveat with this type of mortgage is that all the risk is on the investor and hinges on the quality of the real estate and the borrower’s ability to make good on the mortgage.
2. Invest in a participatory mortgage. This is where a number of investors pool their money together to invest in one specific mortgage. Each investor gets a stake proportional to their investment in the mortgage.
3. Invest through a mortgage investment corporation. This is where a number of investors can pool their money together in a fund which is managed on their behalf and is RRSP eligible. Each mortgage is written in the name of the corporation and the interest earned gets paid back to the investors through a dividend at the end of the each year. The major benefit of this style of investing is that the risk of each mortgage is spread out among the investor over the entire portfolio. This is essentially a mutual fund for mortgages.
If you are interested in mortgages as an investment and would like to explore whether they are a right fit for your investment portfolio, feel free to contact me here or book a call into my calendar below.
