What Is A Syndicated Mortgage?
A Syndicated Mortgage is a single mortgage instrument with a common maturity date, created for a group of lenders when they lend money to a Developer or Builder in order to finance a Real Estate Development Project. The Mortgage is secured against the professionally appraised value of the land and related project assets as collateral for the mortgage. This type of lending is no different from the way in which the banks lend money to you when you obtain a mortgage by placing a charge against the property with the Land Registry Office to secure their loan to you.
Many residential communities, office and commercial buildings across Canada are financed in part through the use of a Syndicated Mortgage. In fact, there are
currently over 100 active medium to large scale construction projects in Ontario financed by Syndicated Mortgages. Lenders typically use their RRSP’s TFSA’s and other Registered Accounts to invest in thee projects in order to achieve fixed, predictable, above average returns in their retirement and savings accounts with security.
The main benefits to lenders are as follows:
Principal Secured: Your investment principal is secured by placing a direct charge against the subject property at the Land Registry Office and regulated by the Government of Ontario just like the Banks do on your own personal mortgage.
Fixed Returns: You receive a fixed and predictable return of 8-9% (depending on project) per year through-out the mortgage term. This above average return is typically higher than what you will receive in a mutual fund, bond, and GIC or term deposit from your local bank.
Defined Term: Your investment will have a fixed term usually between 2-3 years. There is no guessing as to how long you will be investing in a particular project.
Value in Place: Conservative valuations are provided only by Appraisers certified by the Appraisal Institute of Canada to ensure there is sufficient value in place prior to the advance of any funds to the project.
Diversification: Syndicated mortgages provide smart lenders with the opportunity to participate in the proven field of Canadian real estate development by adding another professionally managed asset class to their investment portfolio.
No Market Fluctuations: Unlike the stock market where the value of your investment can change daily, your principal and the interest you earn remain the same until maturity providing peace of mind in uncertain times.
Professional Management: Each project is made up of an experienced project team in addition to the Builder and/or Developer and which normally includes Architects, Planners, Engineers, Quantity Surveyors and Project Managers among others.
Simplicity & Transparency: Most lenders understand how a mortgage works since it is commonly used in home purchases.