1. What is a Mortgage Investment?
2. How do they work?
3. Why should I invest in mortgages instead of other investment vehicles?
4. What are my risks as an investor with Currencia?
5. Why can't borrowers use bank loans?
6. Is there a minimum investment?
7. What is the rate of return and how can Currencia MIC provide that?
8. What if Currencia goes bankrupt?
9. Why hasn't my Financial Advisor recommended Mortgage Investments?
10. Are there any fees or charges to pay?
11. Are Mortgage Investments right for me?
1. What is a Mortgage Investment?
A mortgage is a loan to a borrower who has an obligation for the repayment of the debt, which obligation is secured by real estate property and registered as such on the title of the real estate property. A mortgage investment occurs when a private lender funded by a group of investors lends to the borrower of a mortgage. The borrower agrees to pay an interest rate that then is transferred as income to the investors minus the service charges.
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2. How do they work?
When Currencia Mortgage Investment Corp. collects the appropriate funds, we at Currencia Capital Corporation act as a trustee in order to handle all administration and placement of the funds. Investors are not just investing in Currencia MIC per se, but are investing in the mortgage pool and will receive dividends according to the profits earned from the loan interest.
Currencia MIC will follow the same legal recourse and security as the banks and trust companies do, using a lawyer when dealing with all documentation, security registration and disbursement of funds.
Statements of income will be sent out each quarter, confirming rate of return, portfolio details and account balance.
Mortgage Pool
Money is collected from investors through the sale of shares in a company called a Mortgage Investment Corporation (MIC). The fund created will be invested in pools of mortgages. Shareholders will receive their dividends based on their percentage in the MIC and the profits generated will be split accordingly. MICs create diversity in an investor's portfolio through lending to different mortgages at different interest rates. These benefits can all be provided without risking your money in the volatile stock market; instead the strong Canadian real state market will secure your investment.
Each mortgage will have a different interest rate; therefore MIC shareholders will receive an average of all the interest rates as their rate of return. New mortgages will be continuously introduced to the MIC in order to replace the maturing ones, therefore giving the investor an effortless way to receive constant residual income. Quarterly statements will be provided to ensure your investments are handled with care and your income will be automatically deposited into your account.
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3. Why should I invest in mortgages instead of other investment vehicles?
Mortgage Investment vs. Stocks or Mutual Funds
Although stocks and mutual funds may at times offer very high returns, there are also risks of a market spiral that could leave you without your principal amount of investment. Mortgage investments offer predictable and consistent returns. The pre-determined interest rates of a mortgage give the investor a good indication of monthly income. Another advantage for mortgage investors is that creditors with a mortgage as security on an investment are paid before unsecured creditors in the case that a company goes bankrupt. Therefore, mortgage investors and secured bondholders get credited with their investments before stock and unsecured bond holders.
Mortgage Investment vs. GICs
Guaranteed Investment Certificates offered at banks are less desirable compared to Mortgage Investments because GICs require a long-term deposit while giving out relatively lower interest rates. Investing with Currencia MIC allows shorter length deposits of usually 12 - 18 months and pays a targeted 9% - 10% return.
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4. What are my risks as an investor with Currencia?
Mortgage investments have a relatively low risk compared to stocks and bonds. The only problem that may arise would be the borrower defaulting on his repayment of the mortgage loan. This would cause an interruption of income and monthly earnings may be stalled. This risk can be minimized through two of Currencia MIC's procedures.
One problem that may arise would be the construction issues for the developer that results in unexpected delays and cause the project to be over budget. If this occurs, the borrower may postpone payment and cause disruption to Currencia MIC's profits. Therefore, all budgets and plans proposed by a borrower will be sent to a third party engineer to ensure the budget is on target and the developer presents emergency funds.
Another risk of defaulting may come from the market the developer is trying to target. When a developer is required to sell or lease the property in order to repay our loan, we take additional steps to ensure this property is sited in a safe and profitable location. Our team at Currencia MIC conducts a market analysis in order to place our investments in a development with a good probability of success.
Please also refer to the Risks section of our current Offering Memorandum for more detailed discussion of such risks.
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5. Why can't borrowers use bank loans?
Banks typically does not deal with large sum construction projects that have relatively higher risk because it is labour intensive for a lender. Banks tend to take over the mortgage once the development is completed. Private lenders such as Currencia are willing to deal with the paper trial left behind these commercial mortgages, therefore we are able to charge higher interest rates and in return give our shareholders an above average return.
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6. Is there a minimum investment?
Yes, the minimum investment requirement is $5,000. If the investor would like to purchase additional shares after the initial investment, shares are to be purchased with a minimum $5,000 subscription.
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7. What is the rate of return and how can Currencia MIC provide that?
Rates of return depend on the type of fund an investor decides with in relation to risk tolerance. Mortgage investments typically pay between 9% and 10% annually. Currencia MIC is able to pay above average returns because you are investing in a tax-exempt Mortgage Investment Corporation (MIC). Since we pay 100% of our net profit to investors, the company has no profit on which to be taxed.
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8. What if Currencia Capital Corporation goes bankrupt?
Since the investors did not originally invest in Currencia Capital Corporation, the bankruptcy will only mean a lost of the mortgage's trustee. In this case, the interest in the mortgage or MIC will be returned to the investor and the administration work will be taken over by another trustee.
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9. Why hasn't my Financial Advisor recommended Mortgage Investments?
Financial advisors do not typically know about this market because there is no financial incentive for them to recommend mortgage investment. Since the fee is paid by the amount of profit gained and not by the investor, the investment advisor does not want to keep your money where there is no finance gain for them.
While most advisors recommend mutual funds, there is no security in stocks and bonds. Mortgage investment will pay equal or higher returns with valuable property backing their investments.
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10. Are there any fees or charges to pay?
No. We charge no fees or charges to you for the purchase of shares. Service charges for Currencia MIC are taken from profits of the company instead of investors.
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11. Are Mortgage Investments right for me?
Mortgage investors are typically someone who is looking for an alternative stream of income other than the volatile and unstable stock and bond market. Mortgages can ensure a good stable monthly income without locking up investors for long term. Experts who are trained to obtain maximum returns with minimal investor risk manage your investments.
Do you think mortgage investments will fit your portfolio? If so, call us for an appointment with one of our representatives.
Suite 208, 12877 - 76th Avenue
Surrey, British Columbia, V3W 1E6
Tel: (604) 595-2625
Fax: (604) 595-2626
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