First Mortgage Investments provide investors with a secure investment and good returns.

To assist investors in their understanding of First Mortgage Investments this note provides answers to some of the most common questions. If you have any further questions or if any of the answers provided require further clarification please contact us.

1. What is a First Mortgage Investment?

When an individual lends money to another individual and takes a first mortgage over that person’s home or property that is known as a First Mortgage Investment. The Mortgage is the security by way of assignment of the property for the payment of the debt.

2. How secure is the First Mortgage Investment?

Two key elements establish the value of the security:-

    1. The value of the borrower’s property. A professional Valuation is obtained from a qualified valuer to ensure that an accurate value of the property is provided.
    1. The loan to value ration (LVR). A prudent loan is made based on the value of the property. The loan to value ratio should never exceed 66% allowing a reasonable margin in the event of a forced sale. The loan to value ratio reduces where the property to be mortgaged is vacant land, rural property or commercial property or when property prices are over-inflated.
  1. What if a borrower fails to make payment?

If a borrower is in default a late payment notice is issued. If the notice is ignored proceedings are commenced to sell the secured property. Auction sale expenses associated with the sale are deducted and the balance is used for repayment of the capital sum invested plus interest and legal costs.
  1. Why don’t people borrow from a bank?

There are a variety of reasons why people choose not to deal with a bank:

 

  1. Who can invest in a private mortgage?

Any investor is eligible. The investor may be an individual or entity and may include retirees, business people, churches, charities, clubs, friendly societies, internally managed superannuation funds, insurance companies and overseas residents.

  1. How long do I need to commit to a first mortgage investment?

Mortgages are generally for a fixed period of one to two years.

A first mortgage must be treated as a fixed term investment, however, in the case of an emergency it is sometimes possible to redeem your investment before the end of the term if we are able to find another investor to take your place. There may be a cost involved in redeeming your investment prior to the end of the fixed term.
  1. How much does it cost me to enter into a first mortgage?

We charge a fee of $100.00 per transaction for each mortgage. All other costs relating to the setting up of the mortgage are paid by the borrower.
  1. Will I be told where my money is invested?

Yes, funds will only be invested in accordance with your instructions. You will be given precise details of your investment before any funds are invested on your behalf.
  1. If interest rates rise or fall will this affect my return?

Once you have invested in a fixed rate mortgage the interest rate is fixed for the term of the mortgage.
  1. When is interest paid?

For most First Mortgage Investments interest is paid monthly in arrears but the first payment will be paid 2 months in arrears. This is a requirement of the new Consumer Credit Act whereby the payments must be held in trust for one month before being released to the lenders.

Interest can be paid either by cheque direct to you or direct credit into your bank account.
  1. How much do I need to invest?

A minimum investment of $10,000.00 is usually required.

  1. What rate of interest can I expect to receive?

Investments are presently available with a return to investor of approximately 6.25% to 9% per annum. This rate may fluctuate with the amount of the Loan Value Ratio, a very low value ratio returning a lesser interest rate.

 

 

 

Please telephone our office and we will be happy

to discuss your investment requirements