Our policy is safety first, so we avoid the level of risk associated with high interest rates. Fisgard investors are satisfied with a more modest return and better security.
Risk & Reward
It varies from one fund to another but generally speaking the cost of operating a Mortgage Investment Corporation, including setting aside a reasonable reserve, is about 3%. Therefore when a MIC delivers a 5% net dividend to you, the MIC must lend its money out on mortgages at 8% interest.This is possible and reasonable for a private lender such as Fisgard. However, a MIC that offers a 9% net dividend to its shareholders must be lending its money at about 12%, which is quite high.Who would pay 12% on his or her mortgage? Under what circumstances would you pay 12% interest to borrow money on the basis of mortgage security? It’s a question that needs to be asked, as you could be stretching your risk a bit too far by reaching for such a high return. In today’s real estate market borrowers would have a hard time paying 12% except under unusual circumstances, and would run the risk of default.