Rate of Return

Current Pricing (as at Jan 2025)

Drake Direct Mortgage Investments:

First mortgages go from 8.75% to 10.75% depending upon the “pricing factors.”

Second mortgages go from 9.75% to 15.75% depending upon the “pricing factors.” 

PRICING FACTORS:

Mortgage return rates vary with the fluctuation of interest rates in the marketplace but the main “factors” that differentiate pricing between mortgages are mortgage charge (1st, 2nd, or 3rd mortgage,) location of property, type of property, loan-to-value, credit history, and overall strength of the borrowers. 

Mortgage Charge – Investors will generally receive a higher yield for a 2nd mortgage than a 1st mortgage, and higher still for a 3rd mortgage than a 2nd mortgage.  (3rd mortgages are rare and should only be considered by experienced mortgage investors.)

Property Location – A property with a good location is considered more marketable and because the property is more marketable, the mortgage will be more secure and command a lower yield.

Property Type – Residential properties are preferable to commercial or agricultural properties, and urban properties are preferable to rural properties.  Single family properties are preferable to strata or multi-family properties.  The better the property type, the lower the return on the mortgage.

Borrower Strength (Covenant) – This refers to the employment of the borrower, income, stability of employment, assets, liabilities, etc.  The stronger the applicant the stronger the mortgage and the lower the mortgage yield.

Loan-to-Value – The lower the loan-to-value the lower the interest rate.  Loan-to-Value is calculated as the mortgage investment amount plus any senior mortgages (if applicable) divided by the property value as determined by a professional appraisal or provincial property value assessment.  Note:  Chartered banks lend to a loan-to-value of 80% - a mortgage investment with a loan-to-value higher than 80% should only be considered by experienced investors.

Credit History – An applicant will generally qualify for a better rate of interest if their credit is good, and a higher rate if their credit is not good. 

COMMON QUESTIONS:

• Why would a borrower take a mortgage from a private investor instead of a bank?
  Usually when a borrower takes a private mortgage they do not qualify at a bank.  Banks require proof of income in the form of tax returns and many self-employed individuals have write offs sufficient to preclude their borrowing from banks.  Additionally, there are numerous clients who make their financial decisions based upon expediency – especially if they are borrowing for investment or business reasons.

• What if I receive a bounced cheque? 
  Drake mortgages call for a $150 dishonored payment fee, and a Drake employee will collect the payment for you at no charge.

• How long do I have to commit to a specific mortgage? 
  Typically, Drake mortgages are written on a one-year term, after one year if the client does not have ability to payout and payments have been made on-time they will be offered a further one-year renewal. If you chose to have your money returned or reinvested in another mortgage, Drake will help facilitate the collection of your funds which involves refinancing or transferring the mortgage to another investor if possible.

• Can the mortgage be paid out before one year?

Yes, the mortgage can be paid out by the client before a year, there will be a penalty clause usually 3 months additional interest for the client to payout before the one-year term.