Mortgages as investments

Mortgages offer high rates of return, relatively low risk (by virtue of the real estate pledged as security and the borrower’s personal covenant), and regular income, at a fixed interest rate.

The legal obligations of the borrower, or mortgagor, and the legal remedies available to the lender or mortgagee, are prescribed by law. Accordingly, mortgages have long been an investment option utilized by relatively sophisticated, affluent investors. These investors typically fund 100% of an individual mortgage, and hold the mortgage directly.

Given the dollar amounts involved, substantial capital is required to fund even a small portfolio of mortgages. The individual mortgage investor is solely responsible for all aspects of the underwriting process, including reviewing the real estate being offered as security, scrutinizing the mortgage application (including the credit history of the borrower, verifying the borrower’s income and employment), and assessing their overall financial capacity. Once a decision to lend is made, the individual investor must then negotiate the interest rate, and other terms and conditions applicable to the mortgage, and instruct a solicitor accordingly. Subsequently, the individual investor is responsible for collecting the payments, and dealing with any arrears or default problems which may arise.

Mortgage Investment Corporations (MICs) represent a very attractive investment vehicle for those investors who wish to reap the benefits of mortgage investing, but who may lack the expertise, time and energy, or investment capital required, to invest by way of holding individual mortgages directly. 

The diversification afforded by investing in a large, professionally managed MIC like Magenta serves to substantially reduce risk. 

A MIC also provides a convenient, and effortless investment vehicle, in that management is fully responsible for all aspects of the Company’s operations, from sourcing the mortgages, to making the lending decisions, to negotiating the most favourable interest rate and terms and conditions possible, to instructing and interfacing with lawyers, to administering the mortgage portfolio.  Even small amounts of new money may be invested on an ongoing basis thus ensuring that 100% of investment capital is always earning attractive returns.

Prospective investors can contact Magenta for more information, including a comprehensive investor information package.

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