FREQUENTLY ASKED QUESTIONS
What is a Mortgage?
A Mortgage is a contract between a Lender (“Lender”) and a Borrower (“Borrower”) the principle feature of which is that the Borrower pledges (Mortgages) land and the house or building on the land (the “Lands”) that he owns, as security for repayment of monies he is borrowing. The Mortgage will also contain the other terms of the loan that have been agreed to between the Borrower and the Lender including the amount of money being borrowed, the interest rate the Borrower is to pay on the money being borrowed, the monthly payment amounts, and the term of the Mortgage (i.e. the date all the principle monies become due).
What happens after a Mortgage has been signed?
The Mortgage is registered with the Land Titles Office for the Province of Alberta. The Land Titles Office will make a notation on the title to the Lands that the Borrower has mortgaged the Lands to the Lender and retain a copy of the Mortgage for its records. The effect of the registration is that the Lender has determined his priority position with respect to the Lands and also serves as notice to all persons, including other Lenders, that wish to deal with the Lands that the Lender has a claim against the Lands that will rank prior to all later claims that may be made or registered against the Lands. It should be noted that property tax arrears, even if not registered against the title to lands, have priority over any Mortgage registered.
Why do Borrowers come to Cedar Peaks Mortgage Services Ltd. when the “Big Banks” charge less interest?
Cedar Peaks is primarily a short-term, asset focused Lender operating in markets not well serviced by traditional Lenders. It is often the case that Investors funds are used to “fill the gap” bringing Real Estate projects to the point where they qualify for traditional Bank financing.
Cedar Peaks provides timely funds to Borrowers on a short-term basis to fund activities such as development, construction and acquisition. There is a growing demand for alternative and flexible sources of Mortgage financing, and this trend is certain to grow as Banks concentrate more on fee-based activities while proceeding to tighten their lending criteria.
What are my risks in a Mortgage investment?
The ultimate security of a Mortgage lies in the value of the underlying Real Estate. Simply put, the greater the appraised value is above the loan, the more secure the loan is. Since the strength of any loan is dependent upon the value of the security, great care is taken when assessing the true value of the asset. As part of our due-diligence process, we employ the services of independent appraisers to aid in the assessment of the security.
Each Mortgage loan is granted on the basis that it will be repaid. In the event it is not, foreclosure action will commence, and ultimately the Investors may become the owners of the secured lands for resale at Market Value.
Is my money liquid when I invest in a Mortgage?
No. When you invest in a Mortgage, you should expect to keep your investment until the scheduled term ends. Cedar Peaks generally writes loans with terms ranging between 6 and 18 months. However, sometimes loans are repaid ahead of schedule, or occasionally the Borrower will request an extended term. This does not usually pose a great problem with Investors as your investment capital continues to earn the same initial rate of return for the entire duration of the Mortgage until repaid.
We encourage Investors to treat their Mortgage investment like any traditional, locked in investment, and to only use the portion of their portfolio that is not required to be liquid.
What fees are associated with owning a Mortgage investment?
There are no fees to the Investor when non-RRSP funds are placed in an Individual/Partnership Mortgage. Joint Venture Mortgages may be subject to a management fee of up to one percent annually of the investment amount.
All fees such as application, Brokerage, administration, appraisal, legal and disbursements, and registration fees are the Borrowers expense, and usually are deducted directly from the Mortgage advance, or when the Mortgage is paid in full.
How do I use funds in my RRSP for a Mortgage investment?
A Mortgage investment is fully eligible for your RRSP. If you choose to hold your Mortgage investment inside your RRSP, you require a self-directed RRSP set up with an institution friendly towards “arm’s length” Mortgages.
Financial institutions offering this service can have slightly different fee schedules for maintaining a self-directed account and administering Mortgages.
The self-directed RRSP account fees, Mortgage set up fees, and annual administration fees will be automatically deducted from your RRSP account. Cedar Peaks will prepare the paperwork required for your investment through your registered plan. It is our aim to make owning these investments easy and hands-free.
How do I get started?
Contact your Cedar Peaks Mortgage Services Ltd. Professional to express your interest. They will answer all your questions and provide you with all the necessary information so you can decide how Cedar Peaks can best work for you.
Decide on the amount that you would like to invest, and if your investment will be from your cash or RRSP account. From there we will assist in placing your funds in a Mortgage, and provide you with a copy of all the related documents.
When is there a default under the Mortgage?
Default usually occurs when the Borrower fails to make one of the monthly payments or is unable, at the end of the term of the Mortgage, to have the Lender agree to an extension of the term of the Mortgage and/or has been unable to obtain an agreement for refinancing with another Lender.
What steps does a Lender take when there has been a default?
When there is default under a Mortgage; the Lender will usually hire a Lawyer to commence a lawsuit against the Borrower, in which the Lender asks to be allowed to “foreclose” on the Lands that the Borrower mortgaged. “Foreclose” or “foreclosure” means the remedy of extinguishing another persons rights, in this case the rights of the Borrower, in the Lands the Borrower mortgaged to the Lender.
For further information regarding the foreclosure process, please download our brochure, contact a Cedar Peaks Mortgage Services Ltd. Professional, or speak to your legal representative. |
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"Cedar Peaks agents have demonstrated a high level of honesty and integrity at all times, showing that the Investor’s interests are always his primary concern."
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Ron Adlington
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