Our primary focus is delivering fast, reliable private lending options to our agents at a very reasonable cost. For any Private Lending inquiries, reach out to Alma Aquino (firstname.lastname@example.org) she will be happy to help!
Private Mortgage FAQs
What Is The Investment Process At Engaged Capital?
New Mortgage Opportunity (NMO) is sent to Investor which includes:
- NMO Summary of loan, property and borrower information
- Mortgage Application
- Investor documents (Form 1 and Trust Agreement) are issued for signing
- Money is deposited to Trust Account until the closing date of the property
- Funds are issued to the borrower at the time of closing at the Lawyers office
Once the mortgage is closed, the investor receives the Closing Package, which includes:
- Investment summary
- Mortgage Charge
- Signed Trust Agreement and Form 1
The Investor will then start receiving a monthly statement in addition to their monthly interest deposits.
Why Your Clients Should Invest in Private Mortgages
- Private investing was once restricted to the affluent – high minimum investment amounts and not publicly traded or listed on the stock market.
- The private market has recently opened up to the average investor with more options for lower minimum investment amounts.
- Investors who have also been seeking portfolio diversification beyond the traditional fixed income options and stock options have been making a move into private lending attracted by the high returns.
- Prolonged periods of volatility have driven investors to private assets that are shielded from market volatility and that offer pure exposure to the asset itself.
- The poor returns of fixed-income investments over recent years are another reason for investors moving toward the private market.
- The low-interest rate environment has also fueled the private market as investors look for more opportunities for higher returns.
- Private investments also provide hedging opportunities for investors to mitigate the swings that typically occur in publicly traded stocks.
- Investors are also attracted to the private mortgage market specifically because there is a standardized legal framework. This means if something goes wrong the investor is protected.
Why Private Investing Is A Safe Haven In Rising Interest Rate Environments
- Investors are also attracted to the private mortgage market in rising rate environments.
- Real estate investors tend to sit out on the sidelines in rising rate environments, creating a unique opportunity for them to invest in private mortgages and realize a return better than physical assets.
- Private mortgages also provide investors with a solid return as the stock market swings and businesses weather through more difficult times.
Private Mortgage Lending Strength and Outlook
Why More Homeowners Are Turning To Private Lending
- Private mortgages are on the rise as interest rates rise and indebted Canadians start to feel the pinch.
- Total household debt has climbed since the pandemic began and has picked up sharply since the middle of 2020.
- An increase in mortgage debt has offset the decline in consumer debt we were seeing.
- High household indebtedness and the housing market boom has increased the risk to the Canadian economy and financial system over the medium term.
- Buyers are purchasing homes because they expect prices to continue to go up – contributing to market imbalances and leaving many vulnerable to future price declines.
- Many are taking on large mortgages relative to their income leaving them vulnerable if a job loss was to occur or the value of their home decreases.
- Many Canadians are also still unemployed or underutilized. In 2021, 1/3rd of the labour force was unemployed or underutilized with 1 in 5 mortgage borrowers do not have enough liquid access to cover mortgage payments for two months.
- Build up of mortgage debt in 2020 and 2021 came from high loan-to-value (LTV) ratio mortgages and loan-to-income (LTI).
- Those with higher LTI and LTV are more likely to fall behind on payments.
- Many homeowners have a greater risk of falling behind, but also smaller equity stakes because of the high loan amounts compared to their income.
- Many indebted Canadians facing challenges will need to turn to the private space.
- The pandemic also created a series of unfortunate events for many homeowners leaving them unemployed for a period of time or damaging their credit.
- Then there’s the consumer purchasing fixer-up properties and looking for larger plots of land in unique locations to build on – often will not easily qualify for A or B lending requiring a private arrangement.
- Those with collateral charge mortgages will also turn to private mortgages if their equity has been eaten up and they can’t access money in their home.
Why More Homebuyers Are Turning To Private Lending
- Private lending is the mainstream now.
- Tightening of lending requirements caused many borrowers to be turned away by the prime and alternative lenders.
- Many Canadians can not income qualify as prime borrowers because of the rising housing prices and stress test qualification requirements.
- A number of high-quality borrowers who have equity and down payments are often shut out of that traditional banking system.
- At the beginning of the pandemic, the percentage of solo self-employed individuals rose to 73% according to the Labour Market Information Council Report.
- Approval wait times increased for prime and alternative lenders – many borrowers require faster private options.
- An attractive option for those looking for flexibility and fast turnaround times.
- The private industry has seen a high number of business-for-self looking to invest in better returns when their business revenue and stock holdings have taken a dramatic hit.
- Many homebuyers cannot afford to purchase and need a second mortgage option to support a purchase or pay back borrowed funds.
Why More Real Estate Investors Are Turning To Private Lending
- Direct investing in real estate assets is becoming far more expensive and riskier as rates rise.
- Direct investors will see fewer returns in the coming market and will need to look elsewhere for solid returns.
- Investing in private mortgage assets will provide opportunities for solid growth as returns are higher.
Market Share of Private Mortgage Segment Increasing
- Although private lenders represent a relatively small portion of mortgages currently outstanding in the mortgage brokerage market in Ontario, the market share of this segment has grown in recent years.
- According to 2017 FSCO data, private lending accounted for approximately 8 percent ($10.6 billion) of the total dollar value of all mortgage transactions reported by mortgage brokerages. This figure grew by almost 77 percent from the 2014 figure of $6 billion. and during the same period, the number of brokerages that reported using a private lender increased by 11 percent.
- A survey conducted by CMHC in 2019 had shown that private lenders’ (such as mortgage investment companies) market share had grown to represent 7 percent of uninsured non-bank mortgage originations in 2019.
(Source: Ministry of Finance)
Risks Investors Should Consider
- Transparency, due diligence and liquidity
- Individual investors do not have the knowledge and resources to perform proper due diligence on private mortgage assets.
- Can lock in the money for a given period of time reducing liquidity if needed
- Transparency can be lower than publicly traded assets.
How Does Engaged Capital Minimize Risk
- Professional due diligence
- Full transparency on every asset
- Short one year investments
- Monthly dividend payouts.
- Focus on capital preservation
- Managed and Enforced
Through our established relationship with the mortgage broker channel and decades of experience in Mortgage sales, underwriting and risk management, Engaged Capital Inc. is able to offer its investors the opportunity to invest in qualified mortgages.
Professional Due Diligence and Underwriting
The role of a mortgage underwriter entails working alongside the mortgage broker or agent to ensure that the borrower is not overextending their budget. To approve or deny a loan, the underwriters at Engaged Capital create an in-depth analysis of the loan package. This analysis is used to determine if a potential borrower presents an appropriate amount of risk. Our mortgage underwriters will further assess the risks to both the borrower and the lender thereby reviewing risks from all perspectives.
The firm prides itself on following fundamental lending strategies that have demonstrably minimized capital loss to investors. Through full transparency into each asset, Engaged Capital Inc. ensures the highest level of protection for its investors.
Short Term Loans
To reduce risk we offer short one-year loan terms. Clients also have the option to invest cash or registered funds – TFSA, RRSP, LIRA, etc.
Monthly Interest Payments
Interest payments are directly deposited into your account on the 15th of every month (or the next business day). Monthly investor statements are sent on the 15th of every month with a portfolio overview, so clients can easily keep track of their investments.
Our main goal is to protect our investor funds. Capital preservation has and continues to be the core of Engaged Capital lnc.’s mandate.
Managed and Enforced
Fully managed and enforced through Engaged Capital, including all associated costs. If anything happens to the mortgage and needs legal action, the company’s lawyers will handle everything for you. Engaged is also registered on the mortgage charge, so if the payment bounces from the borrower, the investor will still receive their monthly interest payment.
“Market fluctuation, credit risk and exposure are all elements that we consider when determining the validity of potential mortgage investments. The exit strategy is also the main focus, as we believe getting our clients into the mortgage investment is just the beginning, the true success is getting them out.” Shubha Dasgupta
Lender and Vendor Partner Session: Engaged Capital
President of Engaged Capital, Alma Aquino introduces the 3 pillars of Engaged Capital.
What You’ll Learn
- Lending and area matrix
- Types of Loans/Products that they offer include, purchases, refinances and ETOs
- Real-life construction deal scenario where she explains the process
- How you can make money investing with Engaged Capital
How To Submit To Engaged Capital
What You’ll Learn
Learn how to request a consultation with our internal private lending team and how to submit to them directly within MyPineapple.