Mortgage Broker

38 | Consumer Guide 2015 mbabc.ca % lender can be registered on title as a mortgage lender in proportion to his or her interest. Alternatively, a trustee can be registered as the mortgage lender and hold the proportional interests of the syndicate mortgage lenders in trust. For instance, if four people invested $100,000 each for a mortgage loan that totalled $400,000, then each lender would have a 25 per cent interest in the mortgage. The mortgage, or the trust document registered with the Land Title and Survey Authority, would indicate that each lender was a mortgagee with a one-quarter share of the mortgage. Syndicated mortgages allow people to participate in larger loans that may exceed the amount of money they have to invest in a single mortgage, thereby offering greater mortgage investment choices. Some investors opt to invest in mortgages by placing their funds with a mortgage investment corporation (MIC). This is a popular vehicle for mortgage investing and offers investors specific tax advantages. It is similar to a mutual fund but generally holds only mortgages as investments. Risk of mortgage defaults is mitigated by the pooling of funds and spreading the risk across numerous mortgages, so that if one borrower defaults, the impact of a borrower default is distributed amongst all investors and all mortgage investments held by the MIC. A well-managed and prudent MIC therefore provides a relatively safe private mortgage investment. The administration of a MIC's mortgages is done though a mortgage management company, which is a licensed mortgage broker. Private mortgages are generally used to finance mortgages that do not fit the criteria that most lending institutions must follow. This "alternative" mortgage market is significant. It allows people with credit, income, equity and property-condition problems to obtain mortgages, funding many real estate developments and construction projects throughout the province. As an investor, private mortgages should average you higher rates of return than your deposit investments. But as with all investments, risks must be calculated. Your primary security comes from the equity and value in the real estate. If the loan-to-value ratio is too high, then the risk is higher. If the loan-to-value ratio of the mortgage relative to the property value is low, then the risk is significantly less. A licensed mortgage broker who specializes in placing private mortgages will help you evaluate the risks and rewards. In choosing a mortgage broker to assist you with investment decisions, it is invaluable to obtain references and ensure that a prospective broker has a track record of success. MBABC members are licensed mortgage brokers who can assist you with your decision to invest as a single lender in a private mortgage or in most mortgage syndications. "The MBABC has a database of mortgage broker members on the front page of our website where people can search for brokers with different specialties in their area," explains Gale. "If someone does not know of a mortgage broker whom they would like to use, this is an excellent place to start their search – go to www.mbabc.ca or call 604-408-9989." You can also check the Financial Institutions Commission of B.C.'s website at www.fic.gov.bc.ca to see if both the individual and the company you are dealing with are licensed as mortgage brokers. Many MICs are also governed by the B.C. Securities Act; you can check if they are in good standing with the B.C. Securities Commission at www.bcsc.bc.ca. And always look for the symbol of excellence, "MB," when choosing your mortgage broker. • Investing with a registered account RRSPs, TFSAs, RESPs and RRIFs are a key source of funds for investors looking to invest in mortgages, but such funds must reside in a self-directed plan. Not all self- directed plans at financial institutions will offer the ability to invest directly in these types of investments as they are highly specialized and require that the trustee of the plan have adequate administration capability to process the payments. Your mortgage broker can direct you to the specialized institutions that can house your self-directed RRSP, TFSA, RESP and RRIF investments in mortgage, syndicate and MIC investments.

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