36 | Consumer Guide 2015 mbabc.ca
M
ost people think of calling
a mortgage broker when
they need to borrow
money to either purchase
or refinance real estate.
But while mortgage brokers can structure
both ends of a mortgage transaction and
find lenders for borrowers in need of a
mortgage, they can also find mortgage
investments for people looking to invest
their money. Mortgage brokers play a
significant role in both sourcing mortgage
investments for investors and then
managing the ongoing relationship with
the mortgage borrower on behalf of the
investor. These investments are commonly
known as "private mortgage investments."
Samantha Gale, CEO of the Mortgage
Brokers Association of BC, estimates
mortgage brokers manage and fund over
$4 billion of private mortgage funds per
year in B.C. With staggering numbers like
this, it makes sense that private mortgage
investments have a significant impact
on the economy in B.C. Gale further
explains that, "These private mortgages
play a significant role in helping buyers
purchase homes, give access to people
who need to refinance their property for
debt consolidation purposes, and also
provide funding for many construction and
development projects that would never
get off the ground if it were not for the
availability of private mortgage capital."
What are private mortgages?
Private mortgages are mortgages where the
funds lent to a borrower do not come from
an institution such as a bank, credit union or
trust company. Instead, the funds come from
private individuals. Various forms of savings
can be used to invest in mortgages. If you
have money available in your savings, RRSP,
TFSA, RESP or RRIF account, or a holding
company or family trust, you could use these
funds to invest in mortgages. Effectively, you
become the lender.
Prior to the deregulation of financial
services between the 1960s and the 1980s,
private mortgages were actually a very
common way for Canadians to finance
their real estate purchases simply because
Mortgage brokers not only arrange mortgage financing, they also provide
opportunities to invest in mortgages
By Ajay Soni
mortgAgeS Are
An AttrActive
inveStment option
