|
Common Questions About Mortgages
What is a Mortgage?
A mortgage is simply a debt instrument secured by a registered
charge on real estate. It is a promise to pay by the borrower
(mortgagor) to the lender (mortgagee) a certain amount of
money on stipulated terms and conditions. A mortgage is registered
in the Land Titles Office and cannot be removed other than
with the consent of the lender or by a court order.
Why invest in Mortgages?
(The 3 R’s... Real returns with
Real security from Real property)
Rate of Return
Investments in private mortgages can consistently earn between
8.75% and 15% depending on the degree if risk, with an estimated
average return of 11% per annum. If you re-invest the interest
received at the same rate, you should double your initial
investment every seven years.
This rate of return compares very favourably to other forms
of investments. Compare these returns with the 1 year and
5 year average returns as follows:
| |
1 Year
|
5 Year
|
| 183 day Canada
T-Bill |
2.7%
|
4.5%
|
| Average 1 year
GIC’s |
1.6%
|
3.4%
|
| Average 5 year
GIC’s |
3.9%
|
4.6%
|
| TSE 300 index |
(14.1%) |
( 0.8%) |
| Dow Jones Industrial
Average |
(14.2%) |
4.1% |
| Mortgages |
8.75% |
10.0% |
Security
Unlike investments in stocks or bonds, mortgage investments
are secured by tangible assets that you can “touch and
feel”. Typical mortgages are based on a percentage of
the appraised value of the real estate security or the Loan
to Value Ratio (LVR). By combining this with short mortgage
terms (the length of time of the loan is outstanding) the
likelihood of the value of the real estate dropping below
the value of the mortgage is considered minimal.
As an example, if you were to invest $100,000 in a mortgage
today, with real estate security worth $133,000. In two years
time, when the mortgage matures and is repaid, the value of
the real estate could drop 25% and your initial investment
should still be protected. Compare that security to a $100,000
investment in a mutual fund whose value drops 25% to $75,000
after you purchase it!
Low Volatility
Mortgage investments have a stated interest rate for the length
of the loan that typically is constant. You know what you
will earn on your investment when you make it, much like a
GIC but at higher rates.
Diversification
Part of every good investment strategy should include different
types of investments to reduce your exposure to the volatility
associated with individual market segments, and accordingly
protect your assets. Mortgages give you a passive way to invest
in real estate while minimizing risk and preserving capital.
Periodic Income
Once the borrower receives the mortgage funds, he is required
to make regular periodic payments of interest and in some
cases part of the original loan. This can provide the investor
with regular periodic cash flow.
Professional Management
Axcess Capital Partners manages all the details of the mortgage
loan. We coordinate all the legal documentation, monthly mortgage
administration, mortgage renewal negotiations. And we collect
payments due and pass these payments on to you, the lender.
Fees for this service are 2% or less of the loan amount.
What are the Risks
Associated with Investing in Mortgages?
Value of Underlying Real Estate
Mortgages are generally safe investments in a stable or rising
real estate market because they are backed by real property.
In a declining market, the value of the underlying real estate
must drop to below the value of the mortgage registered against
the property before the investment is at risk. Based on the
expected changes in the market, the Loan to Value Ratio (LVR)
at the time of the initial loan is adjusted accordingly to
reduce risk of loss.
Funds Held In Trust
Mortgage funds forwarded by you are held “In Trust”
to be used only for the agreed purpose. When payments are
received from the borrower, these amounts are also held “In
Trust” until distributed back to you, the lender. These
Trust Funds, and the transactions related to them are, under
Provincial Legislation, audited annually and reviewed by the
Provincial Association responsible for licensing Mortgage
Brokers. Just like a Lawyers Trust Accounts, these amounts
are yours, and cannot be used for any purpose not authorized
by you.
You Choose the Real Estate Mortgage that is Right for
You
Before you invest with any borrower, you and your financial
advisor can review the details of the proposed loan, including
investment term, interest rate, minimum investment required
and payment terms together with a description of the project
or property used as security for the loan. Based on this information,
and any additional details required, you make the decision
to invest or not.
The types of First and Second Mortgage investments available
can include the following:
- Residential single family and multi family purchase and
developments
- Condominium conversions
- Land acquisition, land servicing and new construction
building loans
- Commercial, retail, industrial and resort/hotel projects
How Do I Invest In Mortgages?
Directly
Axcess Capital Partners will find, qualify, and negotiate
a loan on your behalf directly with a borrower. We take care
of all the work for you.
Through Your RRSP’s and RRIF’s
Funds invested in individual RRSP and RRIF plans qualify for
arm’s length mortgages on real estate situated in Canada.
(with certain limitations). The mortgage funds must first
be held as a Self-directed Plan by a Trustee that will accept
mortgage investments.
Pooled in an Axcess Capital Partners Mortgage Investment
Corporation (MIC)
A MIC is acorporation designated for special tax treatment
by the Canada Customs & Revenue Agency. Individual investors
join together with an administrator to create a pool of funds
available for real estate mortgage investments within preset
guidelines. The administrator of the MIC ensures that all
funds are invested within the guidelines and receives payments
for loans currently outstanding, and distributes the income
earned by the MIC (after expenses including administration
fees) back to the investor. This income is treated as interest
income to the investor; it is not taxed within the MIC.
Put in a simple way, a MIC is a mortgage “mutual fund”.
However it lacks the liquidity of a true mutual fund.
What Does Axcess Capital
Partners do as a Mortgage Broker?
Axcess Capital Partners is an agent for lenders in much the
same way a real estate agent is an agent for the seller of
real estate. We are trained professionals that have met a
satisfactory educational requirement in order to be registered
by our Provincial Association. This registration requirement
ensures we provide a duty of care, a knowledge of mortgage
products and a standard of service to meet individual needs.
Our wealth of lending experience allows us to review and qualify
a property for lending quickly.
Axcess Capital Partners’ role is to find and structure
deals that are suitable for mortgage financing. Once the deal
is pre-approved by us, we package the deal for presentation
to the investing public. For this service we are paid a fee
by the person borrowing the funds, not by the investor.
Why use Axcess Capital
Partners?
Axcess Capital Partners is committed to product excellence,
investment security & service. Axcess draws from years
of experience in the financial industry, to serve your mortgage
investment needs. All investment projects are vetted through
an underwriting process prior to being presented to you, the
investor. Preservation of your capital is first and foremost
in every mortgage opportunity we review. Our commitment to
excellence includes the following criteria:
- Quality Real Estate Collateral
- Additional collateral required when appropriate
- Above average return
- Short term (12-24 months) to minimize risk
- Pre planned exit strategies
- Full team of legal and project advisors
- All mortgage investments are arm’s length from Axcess
Capital Partners
Contact us at:
#1200, 640 - 8th Avenue S.W.
Calgary, Alberta, Canada
T2P 1G7
Toll Free: 1-888-221-0915
Phone: (403) 221-0915
Fax: (403) 237-8387
|
