Trust deed investments are nothing new. In fact they have existed for a long time, yet many prospective investors do not know much about them. In essence they are just like mortgages except for one difference: Apart from a borrower and a lender there is a third party involved – an investor.
Nowadays and in the current economic climate, trust deed investments help many mortgage borrowers who are in need of bridge loans. Mortgage brokers who partner with third party lenders are able to assist with a loan and it is part of their job to explain all associated risks.
Trust deed loans can bring above the average profits but only if all risks have been calculated and adjusted to the particular client’s needs. Hence a broker would have to ensure that the client’s future plans and financial resources are compatible with the financial risks involved.
Ever since the recession has hit the market such investments have created losses with similar percentages. Such losses were worsened in the past five years by brokers who failed to risk assess and inform their clients properly and offered inappropriate trust deed loans.
Today the dislocation capital markets means that many commercial banks are not equipped to provide bridge loans on strong collateral, even to customers who would have qualified previously. As such, investors can now provide private loans secured by quality collateral to strong borrowers with less risk than afforded previously.