Mortgage investments are very popular among those looking for alternatives to traditional investments like mutual funds, stocks and bonds, which can be volatile.
Mortgage investing allows you the opportunity to “be the bank” by lending your money directly to a borrower for the purpose of purchasing or re-financing their home. Your investment is secured by way of a mortgage on the borrower’s home.
A mortgage syndicate fund is when a group of individual investors come together and form a funded pool for the purpose of investing in mortgages. This is an attractive option for investors who wish to benefit from mortgage investing opportunities in Canada, but do not have the expertise and time to manage their investments or who do not have the investment capital required to invest in individual mortgages on their own.
The safest type of investment backed by real property
How Private Mortgages Work
Private mortgages have been a bit of a taboo topic because of of our the way our society has conditioned us to use our money. You’re told fro mas early as a child to save you money and keep it in the bank or let the bank invest it for you. So, you do this, keep your money in the bank and make if you’re lucky 1-2% invest in a high yield savings account. Or, better yet, give your money to a wealth adviser and he puts it into a fund and at best you get 3-4% on their best day.
Investing in mortgages works like this…
1) Mr. Smith wants to buy a house, has a 20% down payment, a job, but bad credit because of bankruptcy, divorce, credit card debt, etc. so Mr. Smith can’t get a traditional mortgage from the bank. Mr. Smith needs one year to rebuild his credit until a traditional lender will consider lending to him.
2) Mr. Smith contacts us. We agree to lend to Mr. Smith up to 80% LTV (loan to value) at a higher than market interest rate (10-12% interest only) for up to one year until he can get back on track.
3) Clearmont Capital holds a first position on the real estate with 20% equity built in that is confirmed by our team and an accredited appraiser.
4) We get a call from Mr. Jones who has $50,000 that he is tired of making 3% on with the bank and wants to make 8%. We then take Mr. Jones’ investment apply it to the fund that Mr. Smith’s mortgage asset is in.
5) Every month Mr. Smith pays us, we take 3-4% as a management fee, then pay Mr. Jones 8% or $333.33/month ($50,000 x 8% = $4,000/12 = $333.33).
Why Invest in Private Mortgages
Private lenders have realized that conservative lending guidelines used by banks and conventional lenders exclude many individuals who are in fact able to pay back their loans. Most importantly, private lenders take into account a property’s overall value and marketability as opposed to simply the borrower’s credit history.
This gap in the market allows a mortgage investor to attain a healthy, consistent return on their investment (7%-10% annual return), while at the same time helping individuals who otherwise would not be able to purchase a home.
Your investment is guaranteed by the real property that your investment has funded.
All investments are pre-qualified by our finance, accounting and legal team. Once the investment has cleared our pre-approval process an appraisal is requested to ensure the property loan to value (LTV) is a minimum or 80%/20%.
Your investment will fund mostly residential properties in the south western Ontario and Essex county region.
We require a minimum of one year.
The target return of the fund to its investors is 7.5-9%
No investment is guaranteed, but ultimately your investment has real-estate security behind it. Furthermore, we mitigate any risk with our sound underwriting procedures and lending practices, as well as regular assessment of each loan’s performance.
- When does my investment begin earning interest? Subscriptions commence on the 1st of each month.
- How do I redeem my investment? Redemption’s are issued monthly with 60 days written notice. Should you redeem your investment within the first 12 months a 3% early redemption penalty will apply, otherwise there is no penalty thereafter.
Our experienced team of underwriters follows sound underwriting procedures and lending practices based on:
– Confirmation of real estate values through our network of reputable appraisers
– Creative and prudent underwriting (such as understanding the exit strategy, conducting thorough due diligence, and risk assessments)
– Safe lending margins and shorter-term mortgages to mitigate interest rate and market risks. Most of our mortgage terms are 12 months
– Regular assessment of the loan’s performance
No. Clearmont Capital acquires all mortgage assets prior to applying your investment. This allows the investor to apply their investment immediately.
Distrubutions are sent quarterly by way of either bank draft or electronic money transfer. You also have the option of enrolling an our Dividend Reinvestment Plan (“DRIP”) in order to truly achieve the benefits of compounding interest.