How Private Mortgage Investing Works

Private mortgages are loans that are generally funded by private individuals or companies. When an individual is denied by traditional lending institutions, they can receive a mortgage from a private investor. As a private mortgage investor, you become the bank. If you have access to RRSP or cash funds, you may qualify to lend funds to individuals looking for alternative mortgage options.

Why Should I invest?

Healthy return - On average, a first mortgage investment has an annual return of 6-8%, while second mortgages have a return of 10-14%. Private investing is a great way for you to create a higher return on your investment.

Quick Return - Private mortgage investing has a quick return to get your money back. Term lengths start at 1 year, with an average of 3 years.

Low Risk - With taking the correct steps and relying on the expertise of your mortgage broker and your law firm, mortgage investment is relatively low risk.

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Frequently Asked Questions

How can I manage my risk of loss?

Investing your money in a number of smaller mortgages instead of one large mortgage.

Investing in a mortgage pooling arrangement or mortgage syndication may decrease risk by spreading it out over a large number of second mortgages or other lenders.

Reliance on competent professionals all the way down the line is important. Ask lots of questions and stay informed with your mortgage broker and your lawyers.

Ensure that the lawyers doing the work for you are always available to answer your concerns and question.

What documents will I receive throughout the process?

The documents you will be sent will include:

  • Mortgage Investment Disclosure Statement
  • Mortgage Application from the proposed borrower
  • The Credit Report on the proposed borrower
  • Property appraisal, assessment or Agreement of Purchase and Sale with MLS listing
What is the role of my mortgage broker?

As your broker I help you asses risk on recommended investments and facilitate the process of the investment. I’m most interested in maintaining your business, and reinvesting your money when it comes out of a mortgage at the end of the term of the mortgage if you are satisfied with your return.

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