The most secure and durable investments are in real estate property. Though real estate prices fluctuate from time to time, over the long-term, real estate property appreciates in value. The security for a mortgage is the real estate property itself, making mortgages a good place to invest.
Investing in private mortgages provides a regular income stream, tangible security and a real return to the investor that is superior to bank deposits, GICs and bonds. They are an eligible RRSP investment that is tax sheltered, and you can invest the interest over and over!
Here are some advantages of investing in private mortgages:
No Cost to You – The borrower is required to pay the costs to have the mortgage registered against title to their property. The investor simply sits back and goes about cashing the monthly payment without incurring any further cost.
Monthly Income – A mortgage will generate cash each and every month. The amount of the monthly payment will depend on the size of the mortgage, the interest rate and amortization period.
Protected Capital – There is low risk associated with mortgage investments; they are secured by the real estate property if the borrower is unable to make payments.
An RRSP mortgage gives a minimum of 10% yield rate of return that is secured by a first or second mortgage on a property in Canada. At a rate of 10%, your RRSP portfolio should double in value every 7 years.
Private mortgages can be a great investment, as there is security with the equity on real property and the property can be used to help pay off the mortgage if the borrower reneges. The lender is fully covered by the legal documents signed at the time of the mortgage, ensuring that the investment, as well as a profit, is collected.