You probably already know how you make money through private mortgage lending. You put up enough money to cover a mortgage, a broker transfers that through to a borrower, and that borrower pays it back over time with interest. It is of course, that interest that gives you the return and is how you make money. But how long do you have to wait for that interest to arrive in your hands? And how long do you have to wait to get your principal back?
It all of course depends on the type of investment package you choose, and what the terms outline within it. Typically however, each time a mortgage payment is paid by the borrower, a little bit of interest will be paid along with payment towards the principal. Whether mortgage payments are made monthly or biweekly, you will most likely receive a monthly interest cheque for the investment. This is something that you can decide if it’s right for you or not, and speak to your broker about other arrangements if it’s not.
Of course your principal is repaid to you once the mortgage loan has been completely paid off by the borrower. That means that you will see the full return on your money, and then some, dependent on the terms within the mortgage contract. Again, this is something your broker can help you with as they can help you find short-term investments if you want your money back right away; or they can find longer-term borrowers when you want to keep the security of a private mortgage investment in your portfolio at all times.
The fact that you know right away – as soon as the mortgage contract is drawn up – how long it will take before you get the full return of your money is one of the biggest benefits private mortgage investing brings with it. No throwing your money into stocks and hoping for the best, when if ever you’ll see a return; and there’s no need to lock your money up in mutual funds or GICs in order to see the big returns you’re looking for. Choose how much you want to invest, and how long you want to invest for, and then just find a broker to help you on the path towards a secure, and faster, return.