With mortgage investments gaining popularity like never before, many Mortgage Investment Corporations (MICs) are coming into existence. These MICs are designed to attract like-minded investors in pooling their money to a mortgage pool and become real estate investors. They lend the capital out as mortgages and allow investors to earn income via interest and fees, and pays 100% of its net income back to the shareholders.
To make sure you are investing your hard-earned money with the right mortgage investment corporation in Abbotsford, go through the below recommended tips:
- Check their track record and expertise
When considering investing in a MIC, look into the track record and team competence of people sponsoring/promoting it. Anyone can start up a MIC (there are hundreds), but lending intelligently and profitably requires competence. Get help – a professional advisor can help you sift through the noise and locate the people who can give the investment return you seek.
- Check if the investment is appropriate for your risk tolerance
Risk-averse investors should opt for a low-risk mortgage pool. The riskiness of a fund or pool can be determined by its underwriting criteria. Determine whether the pool consists primarily of first mortgages, second mortgages, or a combination of the two. If your primary goals are income and capital preservation, you’ll want to invest in a pool with conservative underwriting standard that consistently produces modest but good returns while also supporting your personal finances.
- Determine the loan-to-value of the mortgage portfolio
The majority of mortgage pool funds follow the eligibility criteria of 75% loan-to-value ratio for a safer investment and risk avoidance. Since banks normally lend at a maximum loan-to-value ratio of 75%, MICs has kept the amount of relatively similar value, i.e. not more than 70% of the property’s worth. This percentage gap between the loan and the property value serves as a safety value and protects investors from frauds and default risks.
- Know about the fees involved
When you invest in a mortgage pool, you need to pay some fees associated with your investment, such as management fees, performance fees, and mortgage origination fee among many other mortgage management costs involved. This indicates that a manager can generate a bigger return than an investor by utilizing various forms of fees. In majority of MICs, the charges for first mortgage are a 1% management or mortgage servicing fee.
If you are still hesitant and don’t know how to analyze mortgage investment corporations in Canada, feel free to talk to our mortgage investment advisors at Versa Platinum. With years of experience in the industry and hundreds of investors joining our mortgage pool, we know how to boost your return on investment with higher quarterly dividends and minimum risks. Contact us for more details.
