Savvy Canadian investors are always on the lookout for opportunities to diversify their portfolios while seeking out the highest returns they can find. If most of your investment dollars are in a single asset class (for example, stocks or bonds), then there’s only so much diversification you can hope to achieve.
Venturing into other types of investments can feel a bit daunting at first, but it doesn’t have to be intimidating — especially when you have direct access to an experienced team who are here to help you in any way they can.
Private mortgage investment is an exciting and dynamic way to put your money to work in Canada while also helping Canadians to land their dream homes or to stay in their current homes.
What Is a Private Mortgage?
A private mortgage is much less common than a traditional mortgage from a bank, but it fills a vital need in the market.
Private mortgages generally have higher interest rates to compensate the people who invest in them. For those looking into private mortgage investing, higher interest rates mean higher returns on that investment. However, there’s also a slightly higher chance that the person taking out the private mortgage may default on their payments since they weren’t able to get a lower-interest mortgage from a bank.
Luckily, even a defaulted mortgage isn’t that bad, because your investment is backed by the property itself. Even if a homeowner defaults on their mortgage, the house now belongs to the investors.
How Does Private Mortgage Investment Work?
When an individual wants to invest in private mortgages, the solution isn’t for them to start looking for people who want a mortgage and to start lending them money directly on an individual basis.
Instead, there are private mortgage funds where multiple investors will pool their resources together to finance many different mortgages for many different homeowners. Naturally, some people will default on their payments. However, when you are part of a fund the risk is spread across many more properties and investors.
Choosing Private Mortgage Investments That Fit Your Portfolio
Choosing the perfect investment products to suit your financial needs, goals, and aspirations requires a look at which assets you’re already holding. This allows you to determine your total net worth, and how much capital can be allocated into private mortgage investing.
We can help you strategically choose a private mortgage investment fund that suits your risk tolerance and investment timeline.
We offer free consultations that only take 20 minutes, during which we’ll explain everything that you need to know about leveraging your capital to gain higher interest rates than banks earn from mortgages.
Where to Find Private Mortgage Investments in Canada
If this is something that interests you and you’re ready to learn more, book a 20-minute consultation with us. Our team will go over everything you need to know and answer any questions you may have.
Who Needs Private Mortgages?
If you’re thinking of putting your money in private mortgage investment opportunities in Canada, it helps to understand who applies for private mortgages in the first place, what their needs are, and how this can be such a valuable service for them.
Somebody who applies for a private mortgage is typically somebody who wasn’t able to get a regular mortgage from a bank or a credit union for various reasons. It doesn’t mean they cannot make their payments, and needing a private mortgage doesn’t mean this person won’t pay it back. There are many situations wherein a private mortgage is valuable, such as…
Self-Employed People and Small Business Owners
Self-employment income can vary from month to month and year to year. This variance isn’t as common for somebody employed at a steady job who earns about the same amount each month. Unfortunately, a less steady income makes it trickier for self-employed people to qualify for mortgages.
Due to this, private mortgages are an option for small business owners and self-employed people that want to buy their own homes. With the rise in home-based businesses and remote work, it’s no surprise that entrepreneurs see the value in owning their own homes.
People With Bad Credit or a Lack of Credit History
It’s very easy for someone’s credit score to take a hit and make them unable to qualify for a mortgage at a bank — which is where private lenders come in. The interest rate is higher, but if they don’t have a lot of other options and they want to buy a house, this will get them there.
From an investor’s point of view, there is a higher risk when you’re lending to people who can’t get a mortgage elsewhere due to credit score challenges. Something that works in the investor’s favour is that if the homebuyer stops being able to make their payments, the home can always be sold to recoup the value of the mortgage.
For Certain Types of Homes
Certain types of homes, such as mobile homes or tiny condos, will run into financing issues when using traditional mortgages from a bank. In these cases, a private lender may have more flexibility.
Financial Emergencies
Everyone runs into some financial emergency at one point or another, but their credit score and history will determine what types of tools they can access to get things sorted out.
A private mortgage lender is there to help people who may otherwise lose their homes or not be able to get a home in the first place. Lenders can help a lot of people, but remember that it’s not a charity – they do it because of the potential for great returns on their investments.
How to Invest in Private Mortgages in Canada
Investing in private mortgages is a great way to put your money to work while actually helping people in need of a home. If this is something that interests you and you’re ready to learn more, book a 20-minute consultation with us. Our team will go over everything you need to know and answer any questions you may have.