Fixed income investors are frustrated with this low interest environment. Five-year GIC’s are paying less than 1% while the Bank of Canada is targeting inflation of 2%. The combination of a sustained low-interest rate environment and expected higher inflation is a recipe for negative real returns. The stock market may not be a suitable alternative as it has witnessed significant instability and negative returns, proving difficult to navigate. So where else is there to look for real return if public markets are not the answer? More investors are looking to private markets for answers.
Private lending is an asset class with a long history of success. Previously reserved for ultra-high-net worth investors, private lending has come a long way and is now accessible to a wider range of investors. A Mortgage Investment Corporation (“MIC”) is a private lending investment vehicle that is not correlated to public markets, provides Investors with higher returns while adding diversification to investment portfolios. Investors can also use their Registered plans for exposure to this investment vehicle.
A MIC has an added feature, unlike other private lending investments, MICs are flow-through investment vehicles, which means they do not pay tax. This allows a MIC to pay 100% of its pre-tax net profit to investors, maximizing returns.
MICs are a great alternative to traditional fixed income options, like GIC’s or Bonds. Morex Capital invests in stable residential properties and secures every transaction with registered liens against the property to minimize risk and protect investor capital.
The concept is simple, mortgage interest paid by the borrower becomes income for our Investors. Investors have the same legal security in a mortgage as banks and other institutional lenders do.
What is a private mortgage?
A private mortgage is a type of loan that is not from a traditional lending institution such as a bank or credit union. The mortgage term is usually shorter, with a one or two-year term. This allows the borrower to achieve his/her goals in the short term whether it’s improving credit score or consolidating debt. Private lenders are not subject to rigid bank regulations and are therefore able to offer more flexible terms and tailored options to borrowers. Below are some benefits of borrowing from a private lender:
- Easy Qualification Process
The qualification process of a private lender is much more streamlined than traditional lenders. Private lenders undertake a holistic approach and are able to consider the unique circumstances of each borrower while banks must follow strict guidelines to qualify for a loan. Private lenders have more tools they can use in the qualification process, including the ability to rely more heavily on the equity position of the borrower.
- Disburse Loan Amount Quickly
Traditional lender underwriting process is time-consuming and bureaucratic. Private lenders follow a simplified yet rigorous process with greater flexibility for tailor-made solutions- they acquire only necessary information and can cut through unnecessary red tape to provide loans within 48 hours – from origination, due diligence, underwriting, registering liens to disbursing the loan.
- Exceptional Interest Rate
Using a flexible approach, private lenders offer tailor-made solutions and often offer a range of interest rates and meet borrowers’ unique requirements.
- Loan To Self-Employed Borrowers
Provided there is sufficient equity collateral that can be registered on a property, private lenders can offer mortgages to those with unverifiable income like self-employed individuals and/or those with irregular income or other unique circumstances.
Connect with Morex Capital to learn more about Private Lending and the Canadian Residential Real Estate Market.