Types of mortgage investments

Previously we have discussed the basic principles behind investing in mortgages and why mortgages serve as such sound financial investments. In a nutshell, lending property owners money in exchange for high interest payments backed by the security of the property itself (collateral) generally results in high returns with little risk. Add to this the extent to which mortgages can be bundled together, and the possibilities become endless.

In fact, let’s discuss in further detail what specific possibilities there are for successfully investing in mortgages. Of course, there are mortgage investment corporations (MIC), which invest in pools of mortgages and reward investors with interest or dividend payments.

There also exist various other mortgage investment funds that also pool together mortgages as investments and offer investors regular and scheduled payments. Such funds usually have the word “mortgage” in their name, such as TD Mortgage fund or Scotia Mortgage Income fund.

Be your own mortgage lender

One very clever mortgage investment option is to actually lend yourself money to buy your first home under the Canadian government’s Home Buyers’ Plan. Up to $25,000 can be taken from a RRSP, and repayments to the RRSP can be made over a period of 15 years. Relying on yourself as a mortgage lender might not be a bad idea after all.

There are other avenues of mortgage lending, too. Real-estate investment trusts (REITs) have become popular over the years. REITs are securities that sell like stocks on exchanges and are comprised of investments either in actual properties, known as equity REITs, or in the mortgages associated with properties, called mortgage REITs. A REIT that consists of both properties and mortgages is often called a hybrid REIT.

Endless possibilities

By now, you should be getting the idea. A mortgage isn’t just something you get from the bank to help you buy and own a house. Mortgages can actually serve as investment options that offer high yields with low risk. The above is only a basic sampling of the kinds of mortgage investments that are out there.

A little research, and some imagination, can only serve up even more possibilities. Or you can come back here to learn even more.

ASCEND MIC is a mortgage investment corporation that specializes in offering investors high returns at low risk in Canada’s mortgages market.

Please contact us to learn more.