Hassle-free Investing

All mortgage loans are secured by real property in Ontario. Upon the investment closing, the investor(s) will be registered on title to the property the same way that a bank would be registered on title when they provide a mortgage. Since the property provides the lender with the security for their loan, it is paramount to protect the investor’s interest in this property. Before closing, the lender(s) are made beneficiary on two types of insurance. The lender(s) are added as a loss payee on the fire insurance policy of the property. Additionally, the solicitor ensures a title insurance policy is taken out for the benefit of the lender providing additional protection.

To compliment these protections which heavily mitigate risk at the time of closing, Hosper Mortgage also has a full-service admin team who manages your loan throughout the term of the mortgage. This naturally serves to mitigate risk since the Hosper Mortgage admin team is in constant contact with the brokers who arranged this loan with the borrower, and also have the resources to contact the borrower directly should there be any issue with the loan throughout the mortgage term.

Personal Bankruptcy and Consumer Proposal are both remedies that Canadians may use when in financial distress. However, it is important to understand that both of these remedies deal with a borrower’s unsecured debt only. Neither Bankruptcy or Consumer Proposal dismiss a borrower from their obligations under a mortgage loan. This is because a mortgage is a secured loan, securitizing the property as collateral. The only way to discharge a mortgage registered on title is to pay it out from available funds, alternative financing or from the proceeds of the sale of the property.

It is also important to note that a mortgaged property cannot be sold or transferred without discharging the mortgage. That is why all real estate transactions in Ontario require the work of real estate lawyer(s).

The minimum return on investment 8%. This is the interest rate paid to you, the investor, to borrower your funds. Occasionally, the annualized yield can increase if the borrower decides to return your funds earlier than expected. (Continue reading for more information on early discharge). In many cases, the return on investment has exceeded 10%.

The majority of our approved loans have a 12-month term. In the mortgage industry, this is considered a short term loan. Short term loans are preferred by private mortgage investors because they protect the investor by limiting exposure to long term market volatility. On a case by case basis, we do occasionally offer 6-month and 24-month loans.

Regardless of term length, all of our mortgage agreements allow for renewal at the sole discretion of the investor(s).

The above notwithstanding, we advise that mortgage investments are generally illiquid. We recommend you do not invest funds which you may need urgently as the resale of mortgage investments is possible, but cannot be guaranteed.

Hosper Mortgage Investments is a fully licensed mortgage administrator recognized by FSCO. We comply with all CRA requirements regarding tax reporting and audit. For the convenience of our investors we can provide a statement of earnings to assist with their annual tax filings. However, since all our investments are direct mortgage investments, there is a self-reporting obligation on each investor to self-report their interest income received from the borrower. Hosper Mortgage does directly not report investment income to the CRA or issue a T5 statement. We advise each investor to consult an accountant to obtain proper taxation advice based on your specific circumstance. There can be no guarantee that the current tax position prevailing at the time of an investment will not change.

Loan to value is a very crucial ratio for mortgage lenders. This ratio represents the share of value of a home which is debt (i.e. loaned by banks or private lenders) against the total overall value of the home.

For example, let’s consider a home owner who has a property worth $1,000,000 and they have a first mortgage for $700,000 from the bank. Now they would like to request a second mortgage from a private lender for $100,000.

In this scenario, the LTV of this second mortgage deal would be 80%

$800,000 (Combined Value of Loans) / $1,000,000 (Value of Property) = 80%

In practice, the lower the LTV value, the stronger the deal because the home owner has a greater percentage of remaining equity protecting the private lender’s investment.

Note: In the above example the home owner has 20% equity remaining in the home ($200,000).
Investors of private mortgages generally like to have a minimum of 15% equity remaining in the property. (i.e. maximum LTV 85%)

Due to the short closing timeline for direct mortgage investments (1 week) only non-registered funds are eligible for investment. However, Hosper Mortgage manages a mortgage fund (Hosper MIC) to accommodate RRSP, RESP and TFSA eligible funds. Speak with a representative for more information.

Yes. You can split the loan with a friend, or we can fill the remaining share of the loan with another investor in our network.

Whenever more than one investor come together to extend a loan to a borrower this is called syndication. While this is more common in construction financing, we can use the same approach to split a loan into smaller shares at the preference of our investors. (i.e. If the loan is requested for $120,000; 2 investors could each take a $60,000 share, or three investors could take $40,000 shares, etc.)

Since more effort and time is required to complete a loan in syndication, preference will always be given to a single investor taking sole share in a loan. That said, approx. 30% of our loans have more than one investor.

Unlike mutual funds where fees are subtracted from your overall gain on investment, none of our fees are collected from the investor. While we do collect fees to manage and service the loans, all of these fees are paid by the borrower at the time of closing.

We will provide you with a qualified third party real estate lawyer to represent your interests as the investor(s) to close the investment. Just like the management fees, legal fees are also paid by the borrower.

To be frank, not much effort is required from the investor(s) to participate in this type of passive investment. Hosper Mortgage is set up as a full-service administrator, which means the investor(s) have their money work for them, and we do the rest. However, our operating model does require each lender to select and approve the specific investments that they wish to participate in. As such, there is a requirement to review deals and work with one of our staff to select the right investment based on each individuals investment objectives.

Aside from reviewing the investment opportunity and property appraisal, the investor is required to sign off on a FSCO (Financial Service Commission of Ontario) mandated disclosure document and a servicing agreement for each loan.