Why Invest in Mortgages
 
Major financial institutions around the globe generate substantial returns by investing in mortgages, and compete closely with one another for mortgage business. There are many reasons why mortgage investments are so highly sought after including the following:

1. Low Administration Costs: Most of us who have had a mortgage know how long it takes to pay this debt off. Borrowers are required to pay all transaction costs associated with having the mortgage registered against title to their home, leaving the holder of the mortgage in the enviable position of receiving the monthly cash payment for years.
    
2. Cash Flow: A mortgage generates cash each and every month. Clearly the amount of the monthly payment will depend on the size of the mortgage, the interest rate and amortization period. However the payment comes in each and every month if the borrower does not want to loose his or her home. Generally, the mortgage payment will be the first payment made by people, even in the event of financial difficulty.  If a person declares bankruptcy, a mortgage holders' security is not affected by the bankruptcy.
    
3. Protected Capital: Perhaps the main reason why financial institutions compete so intensely for mortgage business is the low risk associated with these investments. Obviously the risk associated with a first mortgage is less than the risk associated with a second mortgage, but then again the return from holding a second mortgage is substantially greater. The capital is protected by the value of the real estate against which the mortgage is registered, and the value of the mortgage is decreased only by the borrower making principal payments. The owner of the house cannot deal with the property unless and until the mortgage is repaid in full. If the borrower defaults, all costs incurred by the holder of the mortgage to enforce the mortgage, as well as any unpaid interest, are secured by the registered mortgage as well. If any amount remains outstanding after the property is sold, the debt survives and you can pursue it by garnishing wages and/or seizing other assets. In addition, you can choose to take title to the property by foreclosing. 

We offer two distinct ways to invest in mortgages:

1. Purchase of individual Mortgages: You can purchase an already funded mortgage for the amount left outstanding on the mortgage plus accrued interest to the date ownership of the mortgage is transferred to you.  Payment is made by certified cheque to Woods Law Professional Corporation, Barristers & Solicitors, Unit 203, 120 Traders Boulevard E., Mississauga, Ontario, L4Z 2H7 at which time the mortgage will be transferred to you.  You appear as registered owner of the mortgage on the Title Abstract page for the property in the relevant registry office.  Your only cost is the government fee to register the Assignment document, which is $70.70.

You can also choose to administer your mortgage portfolio yourself, or you can retain the services of the law firm, Woods Law Professional Corporation, to do so for you at a cost of 7.5% of the mortgage payment to a maximum of $75.00 for the first mortgage you fund, and $25.00 for each subsequent mortgage. They will deposit the funds into your account 10 days after receipt of the monthly cheque to insure it clears and deal with any defaults by the mortgagor on your behalf.   Their activities are fully insured under an E & O insurance policy issued by the Law Society of Upper Canada.

To view a summary of the current opportunities available, please call us at 1 877-MONEY36, and we will forward you a list of available mortgages by email.

2. Pooled Investment Fund: You can also choose to invest in Equimor Mortgage Investment Corporation (“EMIC”). EMIC is a “mortgage investment corporation” or a “MIC” as this term is defined in the Income Tax Act, Canada (the “Act”). Mortgagetown acts as principal underwriter for EMIC. A MIC is a flow-through vehicle for tax purposes, which is governed by the tax regulations of Section 130.1 of the Act. That section of the Act sets out that all dividends paid to MIC shareholders may be treated as expenses for tax purposes by the MIC. Therefore, since a MIC pays ALL of its net profit to its shareholders each year, a MIC is an extremely tax efficient investment vehicle as taxation at the corporate level is avoided. This results in a higher before tax yield to investors.  In addition you can reinvest your dividend in additional shares, which allows for monthly compounding.

This investment opportunity is open to “accredited” and “sophisticated investors” as this term is defined in Ontario securities law.  Investors may invest in Class A or Class AA Special Shares.  The minimum investment is $25,000.00.  The difference in the two classes is the level of risk.  The underwriting criteria for the Class AA shares is designed to reduce the risk of this investment to as close to zero as possible for a mortgage investment fund. This is done by limiting the amount of the outstanding mortgage to no more than 65% of the value of the real estate offered as security.   The trade-off is a lower return.  Over the long term, we are estimating a return of between 7.0% and 8.0% for this class of shares. Given GIC’s are paying less than 3.0% this is obviously a very good return for a low risk investment. 

The Class A shares are invested in mortgages that have more inherent risk but the return is higher. However given the maximum ratio of mortgage investment to the value of the real estate is only 80%, there is still a minimum of a 20% equity cushion to protect the investment.  The estimated return for Class A shares over the long term will be between 11.0% and 13.0%.

All new investment is rolled into the EMIC on the 16th of each month. You receive your first cheque on the 15th of the following month. To be eligible to be rolled into EMIC on the 16th of any particular month, you must contact us and request a copy of the Offering Memorandum be sent to you which has a Subscription Agreement attached to it as Schedule A. This Agreement must be completed and delivered with certified funds or bank draft payable to Woods Law Professional Corporation, in Trust for the full amount of the subscription price by the 10th of the month. Their offices are located at Unit 203, 120 Traders Boulevard E., Mississauga, Ontario, L4Z 2H7.