1. Triage the deals that makes sense. Just like how a medic on a battlefield chooses which soldiers can be saved - or not. The specially trained ‘private lending’ mortgage approval committee hand picks the files that make sense - from across Canada. Home n Work finds only ‘plum’ private lending deals for our private investors to choose from.
2. Borrower must have the ability to pay! Sometimes we will take all interest on a ‘pre-paid’ basis (directly out of loan proceeds) that will cover the 12 month lending period until the borrower can obtain conventional lending again. We will structure the deal so it makes sense to both the investor and borrower.
3. Pride of Ownership. We are looking for a sense of pride of ownership. Kids in a local school and involved in sports; the family involved in community events; tidy home - things that show that they are proud to live there and wish to remain in the same home over the short 12 month lending period.
4. We limit mortgage investments to properties that only have strong resale value. Most properties in populated areas across Canada would satisfy this requirement. The property should be normal to the area: a normal house, on a normal city lot, on city sewer and water.
5. Each property is subject to a satisfactory appraisal to the private investor. It is important that the property is not the worst one on the street or the very best one on the street. The property must be an average house on an average street and well maintained.
6. The loan to value (LTV) ratio must be low. (all mortgages/appraised value). The Bank Act states that a low ratio (low risk) mortgage is 80% of the appraised value of the home or lower.
We prefer that no investor/lender invest into any mortgage investment where the loan would exceed 75 percent of the appraised value of the home.
We want 25 percent equity still left in the property after a 1st or 2nd mortgage loan is made from the private investor/lender to a borrower.
7. Owner Occupied residential properties only. This has to do with liquidity, and marketability. The property has to be owner occupied.
Home n Work believes that the best mortgage investments are ones where the borrower owns and lives in the home.
8. A fair interest rate of return for the private investor. This is usually 12% on a 2ⁿd mortgage loan and a little less for a 1st mortgage. The mortgage broker will state the rate that the borrower has already agreed to accept on his commitment page.
The rate paid by the borrower is the same amount paid to the investor!
Payments to the borrowers are based on interest only payments.
So a $30,000 private mortgage investment would pay $300 per month.
9. No third or subsequent mortgages for obvious reasons. No LTV past 80% on the property; 75% LTV preferred.
10. There will be no costs incurred by the private lender because the borrower pays for all appraisal and legal costs. The rate charged to the borrower is the rate received by the lender. The mortgage broker does not charge a fee to the private lender.
11. Diversify into several smaller mortgage investments rather than one big one. Improve diversification further by placing those 2 smaller ones into two “different” geographical areas. For example, if you have $100,000 to invest into private mortgages then place $50k in BC and another $50k in Ontario; or any other Province where a deal makes sense.
12. Full Disclosure! Investor receives full documentation on borrower, appraisal, proposed commitment and terms. Actual name of investor is registered as a mortgage charge on actual title. ILA is given to investor “free of charge.”
Under our ‘shared knowledge’ concept intellectual property is shared within our organization for all and recognition is given for the one making the contribution.’
Rebecca joins the team with over 20 years of business, investment and real estate experience. A true advocate for the consumer, Rebecca brings you unparalleled integrity with unbiased advice. Phone anytime and discover for yourself just how easy and enjoyable the mortgage process can be.
Serving Metro Vancouver Area
& Fraser Valley BC
Direct 604.614.2382
Fax 604.463.7886
rebeccaawram@homenwork.com
www.communitylendingcentre.com
Head Office:
#200 - 5050 Kingsway
Burnaby, B.C.
V5H 4C2
