It’s recommended that every investor, big or small, diversify their investment portfolio to help mitigate their risk. An option available to help diversify an investment portfolio could include investing a portion of one’s investments into private real estate, which is possible with mortgage investments. When paired with traditional investments like stocks and bonds, mortgage investing provides stable returns and lower fees, while mitigating investment risk.

That said, when it comes to mortgage investing, there are many questions investors may have but often find answers difficult to come by. Magnum Mortgage Corp wants to arm you with the most accurate information available to help you choose wisely, and to do this, we’ve answered some of the most frequently asked questions about mortgage investment.

1. Can I use my Registered Retirement Savings Plan (RRSP) to fund mortgages?
Yes! Suppose your needs include redirecting your volatile retirement savings to a steady investment. In that case, you should consider a self-directed mortgage investment with Magnum Mortgage Corp. Depending on the amount of risk you desire and the funds you have available in your RRSP, RRIF, TFSA, LIRA, or LIF; we will be able to find you a mortgage that meets your comfort level.

2. What is the rate of return associated with this type of investment?
Mortgage investments can pay anywhere from 6% to 12%. Your rate of return will be determined on a deal-by-deal basis. We will let you know when we have an investment opportunity for you, and we will discuss the intricacies of the file in depth. The more risk associated with the file, the higher the interest rate we can charge the borrower and, therefore, the more money you will make from the investment. In saying that, the more equity available in the home, the lower the interest rate we must charge to stay competitive and satisfy the borrower to complete the financing through us and, therefore, the lower the rate of return of your investment. This provides a perfect risk vs. reward balance.

3. What is the process of investing with you?
To start, we will fill out the appropriate forms to get you set up with a self-directed investment account. When a mortgage opportunity that fits your criteria becomes available, we will contact you and review the loan details to obtain your consent and approval. If the mortgage is one you would feel comfortable investing in, you will sign the appropriate forms, allowing you to proceed with the investment opportunity. When the loan is ready to fund, the necessary steps are completed to advance the funds from your Self-Directed investment account. You will then receive monthly interest payments into your RRSP if the borrower makes their payments and is in good standing. The remaining principal is transferred back into your RRSP when the mortgage pays out, ready to fund another mortgage. You keep the accumulated interest you have been receiving monthly along the way.

4. How long are the mortgage investments for?
Our mortgage investments are for a one-year term with the ability for you, as the investor, to offer a renewal at your discretion if you allow the borrower another term. This is usually determined by the borrower’s previous year’s payment history.

5. Is this investment only available through Registered Retirement Savings Plan (RRSP) fund?
Mortgage investments can also be made through cash investments. If you are a qualified investor, you will fund the mortgage via cheque or deposit to the lawyer’s bank account, which would hold your funds in trust and prepare the mortgage in your name. In addition to RRSP funds & cash, you can also invest your Registered Retirement Income Fund (RRIF), your Locked-In Retirement Account (LIRA), your Life Income Funds (LIF) or funds in your Tax-Free Savings Account (TFSA). As stated previously, we would still administer these files on your behalf, and the payment would be deposited into your appropriate investment/deposit account monthly.

6. What are the minimum investment amounts?
For a second mortgage, the minimum investment amount is $50,000.00 to around $150,000.00. For a first mortgage, the minimum investment amount typically starts around $200,000.00 up to approximately $500,000.00. There is no maximum for either mortgage. It is up to the investor’s comfort level and what type of mortgage they decide they want. Every mortgage is different, so it is best to be viewed on a case-by-case basis.

7. What sort of risks are involved?
As with any investment with a significant rate of return, there is risk involved. When it comes to mortgages, our underwriters must look at a plethora of details to qualify the applicant. We look at the loan-to-value (the amount of equity left in the home after we fund the transaction); the person’s past credit history through their credit bureaus; their income through their paystubs, letter of employment or bank statements; as well as the logic behind the request for funds. We want to make sure the mortgage brokers or Borrowers that come to us have a clear exit strategy in one to two years to get the borrower back on their feet & qualified with a traditional mortgage by the end of their term. In order to further mitigate risk for our Lenders, appraisals are collected on every file to provide us with the property’s current market value, along with pictures of its condition.

8. How do I get started?
Feel free to give us a call today to set up an appointment to discuss the opportunity of becoming a mortgage investor, how it works, the risks involved, and any other questions you may have.

If you have any additional questions about investing in mortgages, get in touch with the experts at Magnum Mortgage Corp. As a mortgage broker and private lending firm in Sherwood Park, Alberta, Whether you are a borrower looking for a mortgage, an investor looking to invest in a mortgage, or a broker looking for funding opportunities, we have the options available for you. We have been fully licensed under the Real Estate Council of Alberta (RECA) since 2003, bringing value, expertise, and integrity to private lending for over eighteen years.

To learn more about how we can help you, please click here or contact us by clicking here.