Wondering whether mortgage investors and mortgage lenders are two different terms? Yes, they definitely are. The difference between an investor and lender may seem obvious. However, some may consider them interchangeable terms. Also, while the fundamentals may be evident, there is a lot of variance in the details.
The difference between an investor and a lender is primarily in form of how the money is invested and used.
Who is a mortgage investor?
An investor is someone who invests money in an asset with the expectation of receiving a return. This is often accomplished using one of two methods (or both). Investors might seek a return through capital growth, which refers to an increase in the value of an asset over time. A capital gain occurs when an investor sells an asset for a higher price than they paid for it.
Investors can also seek income-based returns. For real estate investors, this would be in the form of rental revenue. Dividends give income to equities market investors. The goal is to create enough revenue over time to cover (and eventually exceed) the initial investment. Frequently, capital gains and income generating techniques are mixed. A buy-to-let strategy is one in which an investor earns income from renters and then sells the property later as its value increases.
Who is a mortgage lender?
Lenders lend substantial quantities of money to another party for long-term payback. Often, interest is added to repayments to make the loan issued viable for the lender. Individuals and corporations can both receive and make loans and investments.
For example, property investors can use loans to fund their investments.
Who suffers more from inflation and rising interest rates?
While there is an obvious distinction between investor and lender, both are impacted by growing costs and supply constraints. To keep up with rising inflation, the Federal bank and other private banks have progressively increased their interest rates.
This increases the costs for both enterprises and investors. Debt is becoming more expensive to service, making low-interest mortgages scarce. Lenders have begun withdrawing residential and first-time homebuyer mortgages off the marketplace.
These facts add to the market’s already high supply and demand pressures. It is estimated that 300,000 homes will need to be created each year to meet demand.
As investors battle for limited resources, they’ll want to ensure they have the best type of lending behind them. Rising costs and interest rates make it more difficult for borrowers to engage with the federal bank.
So, this was an overview of who mortgage investors and lenders are and how they are getting impacted due to high interest rates and rising inflation. If you are well-versed with the benefits of becoming a mortgage investor and want to put your money in a mortgage pool in British Columbia, Versa Platinum is the name to trust. For past many years, we are proudly helping borrowers and investors alike in getting the best returns on their mortgage investment. For more details, give us a call today.
