INVESTING IN PRIVATE MORTGAGES IN THE PROVINCE OF ONTARIO
Private mortgage investing may be an alternative to unsecured investments as it allows the investor to obtain security in the form of a mortgage registered on the title of the borrower’s property. To become a private mortgage investor, there are generally three methods recognized in Ontario. An individual can invest in a Mortgage Investment Corporation, an individual can join a syndicated mortgage, or individual can engage in direct lending to borrowers. Below you will find more information about private mortgage investing.
MORTGAGE INVESTMENT CORPORATIONS
A mortgage investment corporation allows investors to pool their financial resources and invest in private mortgages. The investors of the mortgage investment corporation earn a return on their investment from the interest paid on the private mortgages funded by the firm. Mortgage investment corporations are heavily regulated under the Income Tax Act and may have to register with the Ontario Securities Commission. For more information about Mortgage Investment Corporations, read our article on What is a Mortgage Investment Corporation.
Another method that individuals can utilize to invest in private mortgages is syndicated mortgages. In a syndicated mortgage, multiple investors pool their money to fund an individual mortgage loan. Similar to a mortgage investment firm, the investors of a syndicated mortgage are able to make a return on their investment from the interest paid by the borrower on the mortgage. Syndicated mortgages are more commonly used in situations where the required loan amount exceeds what institutional lenders may provide. For more information about syndicated mortgages, read our article on What is a Syndicated Mortgage.
DIRECT MORTGAGE LENDING
In Ontario, individuals and entities may also engage in direct mortgage lending where they use their own resources to fund a single private mortgage. The direct mortgage lender is able to make a return on their investment through the interest payments paid by the borrower. In this scenario, the lender typically works with a mortgage broker or brokerage to vet and identify viable mortgage investments. Direct mortgage lending requires a lender to have sufficient knowledge of the real estate market and other variables to make good investment decisions. We recommend that you seek professional advice from experienced real estate agents, mortgage brokers, and real estate lawyers when engaging in direct mortgage lending.
If you are looking to invest in private mortgages within Ontario, contact us today to set up an initial consultation where a member of our real estate law team will answer any questions you may have about investing in private mortgages.
Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.