A mortgage investment fund sells units to investors at a fixed dollar amount and lends this money to qualified borrowers through a private mortgage. Similar to conventional mortgages, the borrower is responsible for repaying the loan through a monthly mortgage payment consisting of the principal and interest. Investors in a mortgage fund like Perch Capital earn a return from the interest paid by the borrower on their mortgage.

Mortgage investing can take many forms, including mortgage investment corporations (MIC), a mortgage trust or a limited partnership mortgage fund. Each of these have a slightly different structure and tax treatment, but the concept of earning a return is largely the same.

Investing in a mortgage fund is an opportunity for capital preservation and stable income generation. If your money is sitting in a high interest savings account or GIC as excess capital, and not required for day-to-day expenses, investing in Perch Capital offers a higher rate of return. However, unlike a savings account or GIC where you can start with $100 or $1,000, a mortgage fund typically requires a higher minimum investment.

At Perch Capital, the minimum investment is $25,000. There is no maximum investment limit.

For those who require greater liquidity and immediate access to cash, a mortgage fund investment is not recommended. When you buy units in a mortgage fund like Perch Capital, these units are not traded on a stock market and are subject to resale restrictions under securities legislation. Redeeming units require advance notice and will take time to convert into cash.

Perch Capital currently offers a net yield of 9.00%*. To see our fund performance, click here.

While each has a different structure and tax treatment, the concept remains largely the same. Investors of a mortgage investment corporation (MIC) or a mortgage fund buy units and earn a return from the borrowers making monthly mortgage payments.

If you’re new to mortgage investing, it’s important to understand the pros and cons and how it compares to other investment vehicles in Canada.

‍Benefits of investing in a mortgage fund:

- Diversify your portfolio with a high yield alternative debt investment. There is no asset price volatility, since units are bought and redeemed at the same price. Historically, mortgage fund investments have limited correlation with stocks and bonds. For example, in 2022 even while stocks and bonds were down, with Perch Capital's mortgage fund you would've earned an 8% return.

- Reduce concentration risk. By investing in a mortgage fund, Perch Capital holds a portfolio of mortgages which reduces exposure to any individual borrower. Most people simply don’t have the financial capacity to do this themselves.

- Leverage deep industry expertise. Perch Capital’s mortgage fund team has extensive experience handling underwriting, servicing and mitigating defaults.

‍Cons of investing in a mortgage fund:

- Lack of liquidity. Mortgage fund investing can require minimum investment periods or restrictions on redemptions. It isn't a liquid investment that you can redeem at will. As such, we recommend only investing excess capital.

- Influence is limited. Management will not run individual deals by you for approval. As an investor, you rely on the mortgage fund to assess and deploy capital wisely.

- No guaranteed returns. Mortgage investment funds will communicate their target yield, however the actual payout will depend on borrowers making their mortgage payments. Perch Capital mitigates this risk by fully underwriting the deal and assessing the quality of the borrower and the property before issuing a mortgage approval.

No. When you invest in Perch Capital through a registered Exempt Market Dealer (EMD), you are not charged to invest. An Exempt Market Dealer is qualified and licensed to offer securities in private companies that are not listed on a public stock exchange. To learn about how to invest in Perch Capital, click here.

Perch Capital offers fast processing times and fair rates for borrowers. To learn about our private lending options, click here.