Balancing Your Portfolio

Assigned grade indicates risk level.

We thoroughly assess each mortgage and assign a 'grade' — A, B, or C (least to medium risk profile) — based on several factors. This grade provides a framework for considering a mortgage's details for investment.

Net interest rate return.

The rate listed is the return you receive for the duration of that high-yield mortgage.

A lower grade (B or C) may come with higher return rates because of the slightly higher risk. You can use the other mortgage details to help you assess your appetite for choosing a mortgage with a higher rate.

Remaining time left until payout or renewal.

Consider how long your funds would be locked in (typically 3-month to 3-year terms). If the mortgage is paid out at the term date, your funds are released to reinvest or withdraw. If the mortgage is renewed (it may not be for the same term length), your funds will continue with that mortgage.

Yet, you may also wish to consider term length to hedge for potentially faster return of your funds or for a longer time frame of receiving those particular return rates.

LTV matters.

The loan-to-value (LTV) ratio listed for a mortgage indicates how large the loan is compared to the home's value.

A higher LTV means less equity and less sale amount to pay back creditors in the event of default. A lower LTV reduces your risk in the event of default and can help balance other 'risk' details, like a lower credit score.

Security position indicates payout order.

Get in line? The position of the mortgage listed on the title (first, second, or third), or a blanket mortgage that retains several properties as collateral, indicates the mortgage's payment priority if foreclosure and sale of the home become necessary.

The closer to the front of the line, the higher the likelihood that your investment amount will be recouped. Or, for a blanket mortgage, the added security likely increases the ability to avoid loss.

Note that Morcado's mortgage loss track record is excellent (near zero), but it's a risk that should be considered in your selection.

Location, location, location.

The location of the home (and, therefore, the mortgage loan) can help determine the likelihood of the home's value being retained in the unlikely event of a foreclosure. Morcado mortgages are often confined to larger population bases and stronger markets.

In turn, you can assess the potential desirability of the city and neighbourhood in light of the mortgage's overall risk details.

Credit score offers borrower insight.

Our investment mortgages require a minimum credit score, and aren't considered 'poor credit.' The higher the score, the better the borrower's credit profile and the lower the perceived risk of default.

A lower credit score (often reflected by a lower grade assigned) may come with a higher return rate due to the increased risk.

Property use can reflect a borrower's motivation in paying on time.

Owner-occupied properties are considered lower risk, as they historically demonstrate a higher motivation to pay on time. Rental income properties may face increased payment risk, depending on renter circumstance.

And 'other' usually refers to a second or vacation home, which may present more risk. Again, these details can add weight to your decision in light of the rest of a mortgage's profile.

Owner profile: The story behind the mortgage loan.

The borrower's homeownership backstory can help you decide the 'level' of investment risk. It can also provide insight into the reasons behind the loan, their strategy to make mortgage payments or pay it out — or even if they plan to pay it out early.

For example, a C-mortgage may have a solid 'exit' payout plan that you feel limits the 'overall' perceived higher profile risk.