Mortgage investments are secured by tangible real estate assets that you can ‘see’.
Typically, the loan amounts are based on a percentage of the current appraised value of the real estate security, also referred to as the Loan to Value Ratio (LVR).
By combining a lower LVR with short loan terms (the length of time the loan is outstanding) the likelihood of the value of the real estate security dropping below the value of the mortgage is, in a normal market, considered minimal.
Furthermore, investments are usually secured by corporate and personal guarantees from the Borrower and its Directors, and a floating charge over the other assets of the Borrower.
