43 Years Later

“In July 1968 I made my first mortgage loan and started investing client money in mortgages. Forty-three years later I’m still investing my own savings as well as the savings of 3,700 or so investors in mortgages secured by Canadian real estate property. Nothing has changed fundamentally; however, nowadays we not only invest cash but we also invest funds from a growing array of registered pension and registered savings plans, including the RRSP, RRIF, TFSA, LIRA, LIF, LRIF, IPP, RESP and RDSP. We still invest exclusively in mortgages secured by Canadian real estate and backed by the personal guarantees of our borrowers.

Canadian real estate is recognized around the world as a sound investment. It is not only local need, but international interest that will sustain Canadian real estate values in the long run. Fisgard’s mortgage security is based on Canadian real estate values. We are satisfied with that.

WHY WE INVEST IN MORTGAGES:

• We like Canadian real estate
• We like bricks and mortar security. What is more tangible that an owner occupied home?
• A mortgage produces a regular income
• Mortgages contain specific maturity (payout) dates, allowing us to plan our finances.

Mortgage investments are simple and straightforward. We won’t run the risk of losing money on a hunch that this or that stock or mutual fund might make us a fortune. We are just interested in regular income and steady growth. We have confidence in the enduring value of real estate and we are advocates of compound interest to achieve steady predictable growth. Mortgages are
relatively trouble free and stress free. They are healthy investments compared to speculations that you have to keep a sharp eye on every day, hoping that you will not wake up one day, read the newspaper, and find that your stock has simply evaporated.

Security is everything. I’m always impressed by the fact that all home-owners I’ve talked to think of the mortgage on their home as their most important and pressing debt and, if a choice must be made, they would pay their mortgage before most other debts. Think of that from the point of view of a lender in terms of security. As an investor/lender, this makes a mortgage a relatively safe investment.

Unlike many stocks and mutual funds, mortgages aren’t just graphs and projections on paper; they have a physical reality backing them – real estate. Our investments may be boring, but at least we have security – real buildings that are insured and are situated on real land that is basically indestructible.

Better than a colorful graph. Works for me . . . and thousands of others.”

Risk & Reward

It varies from one fund to another but generally speaking the cost of operating a Mortgage Investment Corporation, including setting aside a reasonable reserve, is about 3%. Therefore when a MIC delivers a 5% net dividend to you, the MIC must lend its money out on mortgages at 8% interest.

This is possible and reasonable for a private lender such as Fisgard. However, a MIC that offers a 9% net dividend to its shareholders must be lending its money at about 12%, which is quite high.

Who would pay 12% on his or her mortgage? Under what circumstances would you pay 12% interest to borrow money on the basis of mortgage security? It’s a question that needs to be asked, as you could be stretching your risk a bit too far by reaching for such a high return. In today’s real estate market borrowers would have a hard time paying 12% except under unusual circumstances, and would run the risk of default.

Our policy is safety first, so we avoid the level of risk associated with high interest rates. Fisgard investors are satisfied with a more modest return and better security.