How can we pay returns from 7% to investors? | Funding


We had a question recently from Jeff, an investor, about investing in our secured property loans. 

Jeff’s question: How can we expect to pay 7% to investors when the going rate for mortgages is around 4%?

This question actually applies generally to all mortgage funds or property debt funds in our sector.

This space has billions of investor funds poured into it due to it increasing in popularity as a great alternate investment to stocks and direct property investments.

It’s a great question and it comes up often so we thought we would answer it in a post.

The simple answer: Our mortgages are not comparable to mainstream 30 year major bank home loans.

Three main reasons mortgage investment funds, including ours, can pay targeted returns from 7%:

  1. We’re a specialist mortgage lender with products suited to borrowers with short term finance requirements. They are only taking the loan for an average of 6-12 months.
  2. Our borrowers are usually more time sensitive than cost sensitive as they usually need the loans to settle within 1-2 weeks. A bank struggles to complete a mortgage application in such a timeframe. We find a lot of borrowers coming to us because they have been told their bank will not be ready and their settlement is quickly approaching.
  3. Our products are far more flexible than mainstream mortgages and our borrowers are prepared to pay a little more for increased convenience and flexibility. A lot of our borrowers are astute property investors who don’t want the hassle of going to a bank.

Thats how we can pay targeted returns to investors starting at 7%*. For example on a typical scenario if we were to pay investors 7% we would then on lend the funds to the borrower at 8 – 8.5%. We make money off the difference or what’s know as the margin.

Here’s a recent example:

We helped a professional couple in Melbourne under following circumstances:

  1. They had paid 10% deposit on a block of land in a newly developed growth area Ainsworth Victoria.
  2. The deadline to settle was 1 week away and if they failed to settle they would lose their deposit.
  3. The land had actually increased from when they signed the purchase contact to when settlement was by about $30,000. If they failed to settle they would lose this increase in equity.
  4. They planned to settle and sell the block with 6 months and turned to
  5. We were able to provide a loan with 7 days.
  6. The investors in the loan received a targeted return of 7.95% return on a 6 month loan term.
  7. The borrower’s exit strategy or repayment plan was to sell the property and repay the loan.

As you can see from the above example a 30 year bank home loans didn’t suit the borrowers needs.

We can help you start building a regular monthly income stream and make your savings work harder. Learn more about our Mortgage Investments or create your online investment account today!

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Online Platform.

Access our investments through our online platform.

  • Invest from $5,000.
  • Fund loans with other investors.
  • Monthly interest payments.
  • First mortgage security.

Whole Investments.

Wholesale and sophisticated investors can fund whole loans via our investor team.

  • $250,000 minimum – subject to loans available.
  • Monthly interest payments.
  • First mortgage security.