Frontenac Blog

The Value of Investing in Canadian Residential-Based Mortgages

Blog-Date-1Apr 21, 2016

How often have you heard that old expression, “your home is your castle”? It’s a basic and timeless truth. As Canadians, home ownership is an embedded value: we’ll do everything we can to protect the homes we own. That’s why mortgages are not only a borrowing opportunity – they’re an ideal investment opportunity as well.

Canadians and their castles:
The Canadian Home Builders’ Association (CHBA) says: “For most people, home ownership is the foundation for long-term financial stability and security. Surveys by Statistics Canada show that the single most important asset for Canadians is their principal residence.”

Mortgages as an investment opportunity:
Canadians’ deep psychological and emotional connection to home ownership creates a powerful incentive for mortgages to be paid off properly.

Investors in Frontenac Mortgage Investment Corporation (FMIC) gain access to a worthwhile investment opportunity. The MIC lends short-term mortgages (80.8% of these are residential-based) and provides smart lending solutions to borrowers who don’t qualify for traditional bank financing. When borrowers pay back their monthly principal plus interest, investors get income from that interest.

Of the fund’s portfolio, 80.8% consists of residentially-based investments: 42% in residences, 18.5% in residential construction and 20.3% in residential development (the rest is in commercial properties, 10.6% and vacant land, 8.6%).

Home ownership, a long-term proposition:
One of the biggest reasons Canadians are so attached to their homes is that they believe homeownership is an excellent investment. The debate about whether to rent or to buy will always crop up.

For most Canadians, the preference will be to buy and, apparently, to hold for life. Research conducted for Investor Education Fund in February 2013 says: “…when presented with five potential ways of capitalizing on the equity of a home, such as downsizing, selling their home and renting or getting a home equity line of credit, four out of 10 (41%) homeowners were not willing to consider any of the options.”

At W.A. Robinson Asset Management, we view these attitudes and behaviour patterns as positive. They underlie responsible borrowing, which translates into valuable investment opportunities. With sound lending practices, prudent investment management, three decades of experience and local market expertise, Frontenac investors can tap into the value that only a residential MIC can offer.

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