With hundreds of Investors under one roof, many of the questions you need answer to have been asked by others. Here are some of the most popular ones.
No. Like any investment, there are risks to investing in private mortgages. In your FREE consultation, you will learn a lot about what the risks are and the steps we take to mitigate them. Private mortgages are not insured by the government or by Magnetic Capital Group. You should not invest in a private mortgage until you are comfortable with the risks involved. It is our job to help raise your awareness to the risks and explain how to invest in private mortgages safely. Please be sure to ask lots of questions. We should have the answers!
The security of private mortgages comes from the collateral that is offered from the Borrower. The only collateral we accept at Magnetic is residential real estate in Ontario and our policy is to refrain from lending any Borrower more than 80% of the current value of their property when the loan is formalized. In order to lose money in a private mortgage with Magnetic, the Borrower would have to default on their obligations to the loan AND the property would have to be sold for a price wherein the net proceeds of the sale total less than the outstanding loan amount plus accrued interest. By lending no more than 80% of the value of the property we have a 20% equity buffer built in to protect Investors from exactly this circumstance and it’s important to remember that there is no pressure on Magnetic to sell the asset if in a default situation. If we find ourselves in a position where selling the property today would create a loss for our Investors, we can always choose to hold the property until the value increases enough to execute a sale that would exit Investors with no loss.
Absolutely. Magnetic is a licensed mortgage brokerage and administrator in the province of Ontario which means we are licensed to source, vette and manage Borrowers on behalf of Canadian Investors when the property being mortgaged is in Ontario. The services we provide are very valuable to the Investor who wants to participate in private mortgages without having to do the work of finding the borrowers, evaluating applications, identifying the highest quality opportunities, and completing the day-to-day tasks involved with managing loans. You could actually do everything we do on your own but it’s a lot of work so you may want to do a few with us first to get your feet wet before trying to do everything yourself.
Interest payments for all Magnetic loans are collected from the Borrowers electronically on the 1st of the month. Provincial mortgage administration regulations forbid Magnetic from issuing payments to Investors until all payments from Borrowers have cleared the banking system which can take up to 10 business days. To remain in compliance and provide our Investors with certainty in terms of when to expect payments to arrive in their bank accounts, we issue all payments to Investors on the 15th of each month. All Investor payments are paid by direct deposit into a bank account of your choice and if you are investing with RRSP or TFSA funds, we will issue the payment directly to the appropriate registered fund account.
Yes. This has to be done a specific way and we take care of everything for you. We’ll help you get your registered funds set up properly to invest in private mortgages and this is included in our service package at no extra cost.
No. There are absolutely no hidden fees or deductions when investing with Magnetic. If the interest rate on the mortgage you are participating in is 9%, you earn 9%. If its 10%, you earn 10%. It’s that simple.
The minimum investment amount to get started with Magnetic is $50,000. That can be a combination of CASH, RRSP or TFSA funds. Once your initial order of $50,000 is filled, you may add on to your portfolio with as little as $25,000 at a time.
No. The only collateral we accept at Magnetic is residential real estate located in Ontario. We do not do commercial mortgages, land loans or construction loans.
No. Magnetic lends money to approved Borrowers and then assigns pieces of its loans to its Investors. Our assignment model provides Investors with some very unique advantages. First, Magnetic is the lender listed on title of the property so that none of our Investors are approached by the Borrower (or their legal representatives) directly when they have a question or inquiry. However, each Investor is listed on a Schedule to title and the servicing and participation agreement that each Investor signs with Magnetic clearly outlines that the Investor assumes all the rights and privileges Magnetic holds as the lender on title. This provides our Investors with direct collateral for their piece of the mortgage while simultaneously creating one degree of separation between the Borrower and themselves for privacy reasons. In addition, our model makes it easy for each Investor to lend the exact amount of money they want to lend regardless of what the Borrower needs to borrow. For example, if the Investor wants to lend $50,000 and was doing this on their own, they would not be able to fund an approved loan for $60,000. With Magnetic, we can fund a loan for $60,000 and assign the Investor $50,000 of it to match their desired investment amount.
This is one of the most important questions a private lender needs to consider and its also one of the reasons Investors prefer to work with a company like Magnetic rather than to try and do this on their own. Time is money and the longer it takes to get your funds invested, the lower your average annual return on investment is going to be. You will receive an invitation to participate in a private mortgage sourced, vetted, and managed by Magnetic within 30 days of placing an order with us.
There is no liquidity in private mortgage lending. In other words, once you agree to lend your money to another person for a year, you can’t just ask for it back if you need it sooner. Fortunately, at Magnetic there are always other Investors waiting for a mortgage to invest in so you can request an early exit from a mortgage you are participating in. While we cannot guarantee that we can satisfy your request, we can always canvas those Investors that are waiting to see if one of them wants to take your place. In the case that we are able to find someone to replace you in the investment, there would be no penalty to exit but you would have to cover the legal and administrative costs involved with formalizing the change. Those costs usually range between $500-$1,000 total.