Should I Invest in a Private Mortgage or in Mutual Funds?

With the stock market having so many ups and downs in recent years, it can be difficult for people to know exactly where to invest their money. The traditional choice for many investors has been mutual funds – that is funds consisting of a combination of stocks and bonds chosen by fund investors.

Lately however, more and more people have been discovering the high returns and relatively low risks – not to mention the steady cash flow – of investing in private mortgages.

Investing in private mortgages is in many respects similar to investing in real estate – but with the headaches of dealing with tenants or getting 6:00 am phone calls to come and deal with a leaky toilet! As a private mortgage investor, you are lending against collateral – a home that in most cases is continuing to increase in value.

Is investing in private mortgages safe?

When people think about private mortgages, many people think that it is an option chosen only by those with damaged credit, but this is not always the case. Many people opt for private mortgages simply because it is hard to prove their income on paper. They may be entrepreneurs or new Canadians. Most are grateful for the opportunity to own a home and they are very conscientious making defaults extremely rare.

In the rare event that there is a default, the lender can exercise their power of sale and recoup most if not all of their investment.

And unlike traditional mortgages, the terms of private mortgages are quite short – usually only one year. So that too, helps to limit the risk.

How can I invest in a private mortgage?

There are several different ways to invest in private mortgages. Two of the most popular ways are mortgage investment corporations (MICs) and mortgage syndicates. An MIC works in a similar fashion to a mutual fund in which money from a pool of investors is used to invest in private mortgages.

Syndicated mortgages are also comprised of multiple investors and they are arranged through brokerages. In these scenarios, investors have more say over the mortgages that they are investing in. Investors can decide details such as whether they wish to invest in first or second mortgages, geographic locations of the properties and so forth. These generate an income stream which may come in the form of post-dated cheques or direct deposit.

If investing in private mortgages sounds like something you might be interested in, contact Matrix Mortgage Global today for more information.