Balancing Your Portfolio

Making the most, mitigating risk.

With Morcado Trust's investment platform, you're in control of your growth strategy.

You have the ability to diversify your investment, balancing across risk levels and borrower details to maximize your passive returns while minimizing your exposure to the inherent risks of mortgage investment.

Yet, you can also choose a more conservative approach with minimum risk or one that focuses solely on higher returns that may come with slightly higher risk.

Here's how to consider the mortgage details when building your portfolio.

Your guide to the mortgage details.

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.

Card Rating

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.

Card 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.

Card Renewal Date

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.

Card LTV

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 the mortgage loss track record for mortgages offered on the Morcado Trust platform is excellent (near zero), but it's a risk that should be considered in your selection.

Card Security

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. Mortgages available on our platform 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.

Card Location

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.

Card Credit Score

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.

Card Property Use

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.

Card Profile

Build it this way, or your way.

Here are some portfolio strategies to consider.

Of course, you can personalize your Morcado portfolio how you see fit — and you can alter your choices as time passes, reinvesting amounts that become available or adding to your investment.

Keep in mind that the Morcado platform has limits on how much can be placed on a single mortgage — designed to encourage a base level of diversification.

In fact, with any portfolio focus, the more mortgages you invest in, the more you reduce your exposure risk to a single mortgage.

Minimum Risk Portfolio

The single best way to build a lower-risk mortgage portfolio is to select:

  • A-Grade mortgages with
  • the lowest LTV, and
  • the highest credit score we assign

You can layer-up by adding more lower-risk factors to that list:

  • Mortgages in a first security position
  • A home location in a higher population centre
  • A property that is owner-occupied

Selecting factors for the lowest possible risk can help you hedge your investment for success with less stress.

You'll still build wealth through monthly high-yield returns that may beat GICs (Guaranteed Investment Certificates) on rates and the stock market for volatile ups and downs over time.

Portfolio Built for Maximum Returns

The C-grade mortgages available on the Morcado platform are considered the 'highest' risk on our platform. They often come with a higher return rate due to the added risk potential (but not always).

To build a maximum-return portfolio, look for:

  • Mortgages with the highest return, which may include more B and C-grade profiles
  • When choosing mortgages for the highest yields, you can still consider the details to choose a lesser-risk profile if both mortgages offer the same return rate

Your Balanced Portfolio

A combination of A, B, and C mortgages spreads your money, reducing your risk exposure to any one mortgage and offering more balanced returns — averaging out between higher and lower rates for a steadier income source.

Disclaimer: The above information and examples offer suggestions to help you choose mortgages for investment, but are not intended to replace professional advice. Please consult your Mortgage Investment Advisor for recommendations based on your financial details and goals.

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