Loans and Borrowers
We provide first mortgage financing on commercial real-estate projects allowing borrowers to bridge to the next development stage and/or obtain construction or longer-term financing. Approximately 80% of our loans are utilized for land acquisition funding or refinancing with terms of 12-24 months, sufficient for the borrower to obtain zoning and other regulatory approvals. The remaining 20% of loans are provided for construction of small to mid-sized low-density residential developments. Borrowers will often request construction financing from Vector after achieving their zoning approvals.
Loans are secured by a first mortgage on a tangible asset, real estate,. and in most cases are personally guaranteed by a significant shareholder of the borrower.
Private capital loans are more cost efficient than equity or mezzanine financing which have higher rates. Traditional lenders such as Schedule I banks or insurance companies do not provide loans on raw land nor on properties without an income stream or a level of pre-sales. Additionally, Vector can fund a loan much more quickly than the large institutions (1 month vs. 3-4 months) saving time and money to the borrower.
Transactions vary in size between $2,000,000 and $40,000,000, as of August 2020 our average mortgage size was $7.1 Million.
Most loans are sourced by our in-house origination department led by Noah Mintz, a managing director and the principal broker of the firm. We use a network of mortgage brokers who know Vector and regularly bring us opportunities. Many of our loans are provided to past borrowers who have come back to us to finance their new projects.
Loan Book Performance and Risk Management
Rigorous investment practices have allowed Vector to achieve an exceptional track record in the fixed income segment. Loans are made on properties located within 100 km of the GTA. We don’t arrange loans in other provinces nor in the U.S. By our records, Vector has arranged over $1.25 billion of financings in the last 10 years.
Real Estate Security:
Mortgages are secured by real properties in Greater Golden Horseshoe.
Vector has been in the mortgage lending business for over 50 years and invests alongside investor so our interests are fully aligned with yours.
Investors build a diversified portfolio of mortgage loans tailored to their needs. We have no minimum required investment amount.
Interest payments are deposited directly into your bank account monthly.
Investors can hold investments in a self-directed TFSA, RRSP or RRIF.
Vector’s historical net return on the average loan book balance for the past 7 years is over 8% per annum.
A default can occur when the borrower fails to live up to conditions of the loan agreement. The most common event occurs when the borrower fails to make the required interest payment, which if not cured, requires Vector to take enforcement measures to obtain repayment. While default rates on mortgages have historically ranged between 3 to 5 % it is important to note that in most cases a default usually results in a delay in the return of investor’s capital and interest and not a loss of capital.
Becoming an Investor
Begin by filling out an Investor Application Form. Upon receipt, one of our agents will reach out to you with an introduction to investing with Vector Financial.
Yes. Individuals may invest funds from their RRSP, RRIF and TFSA. Please contact us for more information on this process.
Yes. The Government of Ontario guidelines generally restrict investing in mortgage syndications without annual investment limits to Accredited Investors only. An Accredited Investor in Ontario is defined in OSC Rule 45-501 and includes, but is not limited to:
(a) certain institutional investors; and
(b) an individual who beneficially owns, or who together with a spouse beneficially owns, financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1,000,000; or
(c) an individual whose net income before taxes exceeded $200,000 in each of the two most recent years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of those years and who, in either case, has a reasonable expectation of exceeding the same net income level in the current year.
This is a basic summary for individuals and if you are unsure if you or your company qualify please speak with us.
Interest income is reported on a T5 statement and is fully taxable. Investors can employ a variety of tax strategies such as investing through a trust, corporate entity, or registered accounts and should speak with their tax advisors to determine the most beneficial way to invest with Vector.