Investing money in a
private mortgage for attractive returns has its
merits and its risks. This type of investment is one
in which a person lends money to a borrower who
pledges real estate as security for the loan. These
types of mortgage investments may be arranged through
a Mortgage Broker.
All Mortgage Brokers in
the province of Ontario are required to be registered
with the Financial Services Commission of Ontario
(FSCO), an agency of the Ministry of Finance.
Do business only with a
licensed Mortgage Broker. Confirm that the broker you
are dealing with is qualified and registered by
visiting FSCO's website: www.fsco.gov.on.ca, or by
calling (416) 226-7776.
Mortgage Brokers must
give you full information
Mortgage Brokers are
required to provide each prospective investor with
information in the form of an Investor/Lender
Disclosure Statement, as well as supporting documents
such as an appraisal and an Agreement of Purchase and
Sale.
This information package
must include:
- a description of
the property or project to be mortgaged;
- the terms and
conditions of the mortgage loan;
- how the mortgage
will be administered;
- in case of mortgage
syndications, terms of the syndications;
- all prior claims on
the property, such as other mortgages, liens
or taxes owing;
- information on the
borrower, including ability to repay the
loan;
- any relationship or
connection the broker has with the borrower
and appraiser;
- any interest the
broker has in the property; and
- the broker's fees
for the transaction.
By law, the broker
cannot accept money from you until 48 hours after you
have received this specified information and have
signed a commitment to fund the mortgage.
Do your homework
It took a long time to
save the hard-earned money you want to invest, so
it's wise to carefully review all documents before
making any decisions. You are entitled to take at
least 48 hours (not including Sundays and holidays)
to review the investment documents. Read them
carefully.
Consider the value of
the real estate. The Mortgage Broker must provide
documentary evidence of the property's value, other
than an Agreement of Purchase and Sale. This could
include an appraisal.
Unlawful activity
Mortgage Brokers are
prohibited from selling or arranging the sale of
mortgages that are, or have been, in default within
the past 12 months.
Mortgage Brokers cannot
accept funds from you to hold for a future
investment.
Risks to consider about
mortgage investments
- They are not
insured by the Government of Ontario.
- They cannot be
guaranteed by the Mortgage Broker.
- They may be
difficult to resell quickly.
Mortgages can be
high-risk investments. Consult your financial advisor
to see if mortgage investments would be suitable for
you.
Visit FSCO's website: www.fsco.gov.on.ca, or call (416) 590-7298, or toll
free, 1 (800) 668-0128 for a copy of its
comprehensive guide to investing in mortgages.
_______
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