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 they fill a vital need in the market.
Private mortgages generally have higher interest rates to compensate the people who invest in them. As somebody looking to invest in private mortgage investments, that means you could potentially earn a higher return. Still, 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.
But that’s not the end of the world, because this mortgage 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. Some people will default, it happens, but when you’re part of a fund, the risk will be spread across many more properties.
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 investments you’re already holding in order to determine exactly where to invest in regards to private mortgage investing.
We can help you strategically choose a private mortgage investment 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 you’re interested in learning more about investing in private mortgages in Canada, you can contact us using our contact information at the bottom of this page. We’re happy to answer any questions that you have about investing in private mortgages. We can go over any previous knowledge that you have, we can address any questions you’ve come across, and we can explain exactly how to get started.
Who Needs Private Mortgages?
If you’re thinking of investing 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 and earns about the same amount each month, but 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:
If somebody has been declined a mortgage at a bank, they may still be able to find a private lender. 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 favor 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.
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
If this is something that interests you and you’re ready to learn more, we’ll set up a 20-minute consultation with you to go over everything you need to know and to answer any questions you may have.