Investors
At Lending Division website, we invite you to explore the opportunities and benefits of becoming a mortgage investor in the Canadian real estate market.
By diversifying your investment portfolio beyond traditional options like stocks and bonds, you can tap into the stable and lucrative world of real estate, specifically through mortgage investments.
What are Private Mortgages?
Private mortgages serve as short-term loans extended to residential and commercial borrowers for various purposes. These loans are provided to support borrowers in situations such as:
Renovations:
Borrowers seeking funds for home renovations or property improvements can benefit from private mortgages, which offer a convenient and accessible financing option.
Job Transition:
Private mortgages can assist individuals going through job transitions by providing the necessary financial support during this period of change.
Return to School:
Private mortgages offer a financing solution for individuals pursuing further education or training, helping them cover tuition fees, living expenses, or other educational costs.
New to Canada:
Immigrants and newcomers to Canada may face challenges when securing traditional mortgage loans. Private mortgages offer an alternative financing avenue to support their homeownership aspirations.
Rebuilding Credit:
Borrowers with a poor credit history or a low credit score can turn to private mortgages as a means to rebuild their creditworthiness while still accessing the funds they need.
Significant Purchase (Equity Take-out):
Private mortgages enable borrowers to access the equity built up in their property, allowing them to make significant purchases or investments without selling their home.
Unable to Prove Income:
Some borrowers may find it challenging to provide the necessary documentation to prove their income. Private mortgages accommodate these individuals by considering other factors, such as the property's value, when evaluating loan eligibility.
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Why Invest in Private Mortgages
Alternative Fixed Income:
Private mortgages fall under the category of alternative fixed income investments. As an alternative investment, private mortgages offer a distinct opportunity outside of traditional asset classes such as stocks, bonds, or cash/equivalents. They provide a steady cash flow and are typically associated with investments like real estate, private debt, income-producing properties, and certain hedge funds.
Returns:
Private mortgages aim to generate higher rates of return compared to traditional fixed income investments. While these investments may have reduced liquidity compared to their traditional counterparts, hold periods for private mortgages can be as low as 6 months and generally do not exceed 24 months without approval for an extension. This allows investors to potentially achieve attractive returns within a relatively short timeframe.
Diversification:
Investing in alternative fixed income should complement rather than replace traditional fixed income investments. Diversification is crucial in managing uncertainty and minimizing risk exposure. The performance of fixed income investments can be influenced by various factors, including changes in interest rates. By diversifying their investment portfolios to include both traditional and alternative fixed income investments, investors can effectively manage risk and capture opportunities in different market cycles.
Our Underwriting Process
Investment Policy Statement (IPS):
Our initial meeting with investors involves a thorough review of their financial position to determine suitable mortgage options that align with their individual circumstances. This personalized approach ensures that investors are presented with opportunities that meet their goals while considering their specific needs.
Loan Origination:
The Lending Division sources mortgages from various channels, including our affiliated brokerage, The Mortgage Division, as well as referrals from banks, credit unions, other institutional lenders, other mortgage brokerages, and existing clients. This multi-channel qualification process reduces the potential for fraud by dealing exclusively with borrowers from trusted sources.
Pre-Qualification:
Following discussions with potential borrowers, The Lending Division presents a range of mortgage opportunities to investors based on their individual IPS. This process ensures that investors are presented with options that align with their risk appetite and investment goals.
Exit Strategy:
For each loan, we establish a clear source of repayment and a back-up source, ensuring a comprehensive exit strategy. In most cases, the primary source of repayment is a take-out from a permanent lender. In rare cases, the last resort would be the sale and seizure of the subject property.
Loan Approval:
Once an investor has been identified, The Lending Division conducts a rigorous diligence process to ensure that the mortgage aligns with the investor's risk/return profile. This process includes physical inspections of the subject property, review of certified appraisal reports, evaluation of the borrower's financial position and credit history, assessment of environmental reports and building condition reports where necessary, and other diligence as deemed appropriate or necessary by the investor and/or The Lending Division.
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Why Invest with Lending Division?
At the Lending Division, we are dedicated to connecting investors with lucrative mortgage investment opportunities in the Canadian real estate market.
Here’s why you should choose us as your partner in mortgage investing:
Professional Management:
At The Lending Division, we understand that investor overconfidence can hinder wealth creation. Our professional management services help mitigate and manage the inherent risks associated with private mortgages, allowing investors to achieve appropriate returns for the additional risk involved. Our expertise and experience in mortgage lending, risk management, and investment portfolio management ensure that your investments are handled by qualified professionals.
Expertise:
The principals of The Lending Division boast extensive experience in commercial and residential mortgage lending, including origination, risk management, and restructuring. This expertise enables us to structure loans that reduce the likelihood of loss for our investors while ensuring an attractive rate of return. Additionally, our team possesses comprehensive knowledge of investment portfolio management principles, which we apply to effectively manage our client's investments.
What are Mortgage Investment Corporations (MICs) and Mortgage Investment Entities (MIEs)?
MIEs: Mortgage Investment Entities are investment pools where investors’ funds are pooled together and lent to multiple borrowers against multiple properties. This structure allows for diversification and provides lower net worth investors with an opportunity to participate in the mortgage investment market. MIEs, including Mortgage Investment Corporations (MICs), focus specifically on residential mortgages.
Pros of MIEs
- Professional Management: MIEs are professionally managed, ensuring that investment portfolios are handled by experts who have extensive knowledge and experience in the mortgage investment market.
- Diversification: By investing in an MIE, investors can achieve diversification by pooling their funds with other investors. This helps spread the risk across multiple borrowers and properties.
- Lower Investment Minimums: MIEs offer lower investment minimums compared to direct mortgage investments, making them more accessible to a broader range of investors.
- Less Investor Expertise Required: Investing in an MIE requires less individual expertise in mortgage lending and management since the investment decisions are made by professional managers.
Cons of MIEs
- Indirect Investment: Investing in MIEs means that the investors’ funds are indirectly invested in mortgages, rather than directly owning the mortgages themselves.
- Less Control: Investors have limited control over the specific properties or borrowers within the MIE portfolio. Investment decisions are made collectively by the professional management team.
- Higher Management Fees: MIEs may have higher management fees compared to direct mortgage investments due to the costs associated with professional management and administrative overhead.
- Potentially Longer Lock-up Periods: Investors may face longer lock-up periods, meaning their funds are committed for a specific period, restricting immediate access to their investment capital.
Are Private mortgages Secure?
Private mortgages are secured by a ‘charge’ against the property owned by the borrower. This charge is registered on title using the Land Titles Registry, ensuring that no other creditor can gain priority over the property without the investor’s written consent.
Private mortgages provide borrowers with interim financing until they meet the more stringent terms of a bank, credit union, or other conventional lender.
Frequently Asked Questions
Compared to conventional mortgages, private mortgages place more emphasis on the value of the property being financed rather than solely relying on the borrower’s ability to make mortgage payments. However, it’s important to note that investors cannot legally profit by taking possession of a borrower’s home in Ontario. At The Lending Division, we prioritize the protection of our investors’ interests, ensuring that every loan we fund includes a comprehensive exit strategy. This strategy evaluates the borrower’s ability to repay the loan, reducing the likelihood of property liquidation.