The Benefits of Investing in Private Mortgages

Private Mortgages are seeing a lot of interest lately in the alternative investments world — and for good reason. There are some major benefits to private mortgages and investing in them. These benefits go past the usual benefit of diversifying your investment portfolio. So what are the benefits of investing in private mortgages?

 

A Physical Investment

 

Whether you invest in a private mortgage on your own or through an MIC, the investment is attached to a physical and tangible property. Even with fluctuations in the real estate market, having your investment attached to a physical property allows for more security in the case of a default on the loan by the borrower. 

 

Variability

 

Put aside the fact that we’re dealing with a physical property. The actual act of investing in a private mortgage is more like providing a loan rather than investing in the volatility of the stock market. A loan must be paid off. Even if it’s not, you have the physical property to secure the loan. Let’s say there are no issues with payment, however. The interest charged on the primary loan is the income and gain for the investor. In this way, a private mortgage investment offers less variability on the income paid out than in stocks.

 

Income & Capital Gains

 

A major benefit to investing in private mortgages is how they’re set up from a financial standpoint. Private mortgages enjoy “flow-through” status on the taxable capital gains and interest income thanks to the Income Tax Act of Canada. There are a few tax benefits to investing in private mortgages, which you can learn about here. 

There are always risks with any investment strategy, especially with alternative investments, that may be lesser-known. Private mortgages investors must rely on a strong real estate market to keep the value of the property stable. The success of a private mortgage investment is also contingent on the borrower paying back the loan. This includes paying off the interest, which is the growth on the investment itself. Despite many of the risks associated with investing in a private mortgage, they’re still very strong options for diversifying an investment portfolio.

Investing in a private mortgage pooled fund through an MIC takes away some of the risks. This is due to an MIC’s specialization in mortgage investment strategies.  If you’re interested in learning more about mortgage investment strategies and private mortgages, get in touch with Jordan on our team today.