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Mortgage investment guide-investing opportunities

What is a mortgage?
A mortgage is a debt owed for a specific length of time, using real estate as security. The difference between the mortgage(s) on the property (what is owed on it) and what the property could be sold for, is known as equity.

Since few properties today sell for cash, mortgage money has to be available. Therefore the mortgage loan is is the basis for nearly every transaction in real estate.

Lenders are known as "mortgagees" borrowers are "mortgagors".

How safe are mortgages?
No investment is 100% safe; but then few investments are as safe as real estate!
Take a look at the houses around you and see how much they have risen in value over the long term.

Based on the continuously rising long term trend in real estate, an individual lending 80% of a properties value today, could have their equity substantially increase over time.

How will I know the value of the property?
Homeguard Funding Ltd. contracts arm's length certified appraisers. They compare the subject property as to value with similar properties recently sold in that area, thus a realistic market value is achieved. The Appraiser photographs and inspects each home and puts in writing an estimate of value.
This gives the prospective mortgagee (lender) an excellent idea of the market value of the property so that a comfortable level of equity is clearly established.

What interest rate can I expect?
Conventional lenders offer low rates, and therefore private money sources like you must compete with these rates. Many investors are wisely investing at slightly less than conventional rates and still making an excellent yield on their money. Rates of return usually are 2 to 3 percent higher than GIC's or C.S.B.'s.

How are payments made?
Payments are usually made once a month, although arrangements can be made to have them paid weekly, bi-weekly or quarterly to investors. Homeguard Funding LTD. insists that the mortgagor (borrower) provides you with post-dated cheques at the time of closing for at least a year.

How much of each payment goes to principal?
Many investors prefer to receive interest only, with no principal. They reason that their security appreciates monthly (or quarterly) with every payment.

Should the investor wish to have principal paid back in addition to interest, then an amortized mortgage is placed with amortization being between 15 to 30 years.

How long must I invest?
The average mortgage can run from 1 to 5 years. Mortgages for periods shorter than 1 year are sometimes available.

What kind of credit will the borrower have?
Homeguard Funding LTD. is a subscriber to Equifax. Each prospective mortgagor is carefully screened by us to insure ability to pay before we approach any mortgagee.

Who pays for legal fees?
Except in rare cases, the mortgagor (borrower) pays all legal costs.

Can mortgages be used in an RRSP? RRIF?
Mortgages are and excellent source for Registered Retirement Savings Plans, yielding a better return than many other plans.

We invite you or your accountant to discuss details with us. Contact us by phone or by e-mail.

In Summary:

The main advantages to mortgage investing are :

• you receive a monthly income with every payment
• you get a high rate of interest on your investment
• your investment is very secure, if properly selected
• your equity increases as the mortgage decreases
• you may use it as an RRSP/RRIF investment
• there is usually no cost to place your investment funds

The main disadvantages to mortgage investing are :

• your capital is not easily recovered prior to maturity
• there is limited growth for inflation
• small amounts of interest may be more difficult to re-invest
• mortgage investments, similar to mutual funds are not insured by C.D.I.C

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