Direct Mortgage Investing: Holding the Charge in Your Own Name

Some investors want to read the appraisal, look at the street the house is on and decide for themselves whether a borrower gets the money. Direct mortgage investing is the route that gives them that control. Instead of buying shares in a pooled fund, the investor lends on a single, identified mortgage and becomes the lender of record.

That control is real, and so is the concentration that comes with it. This guide explains how direct mortgage investing works in Canada, what holding the charge in your own name involves, and where the risks sit next to the reasons investors choose it. This is general education, not investment, tax or legal advice. Mortgage investments are not guaranteed. Returns are targets, not promises, and principal can be lost.

What is direct mortgage investing?

Direct mortgage investing means lending money on one specific mortgage and having that loan secured to you. Your name, or the name of a trustee acting for you, appears on the registered charge: the document registered against the property’s title that gives the lender a claim on the property if the loan is not repaid (see the glossary of mortgage investment terms).

You will see the same idea described in several ways:

• Individual mortgage investing — one investor, one loan, as opposed to buying into a pool.
• Whole mortgage investment — a single investor funds the entire loan. The alternative is a fractional interest, where several investors share one loan; that model has its own rules, covered in how fractional and syndicated mortgage investing works.
• Arm’s length mortgage investment — the borrower is unrelated to the investor, which matters for registered plans.

The charge may be registered in the investor’s own name, in a trustee’s or nominee’s name in trust, or, for registered-plan money, in the name of the self-directed plan’s trustee.

How does a direct mortgage investment work, step by step?

A direct mortgage investment moves through the same stages as any private loan, with the investor in the lender’s shoes at each one:

1. Sourcing. A licensed mortgage brokerage presents a loan: borrower, property, amount, rate, term, position and repayment plan.
2. Review. The investor reads the file: appraisal, credit and income information, title search and proposed commitment.
3. Commitment. If the investor agrees, the terms are fixed in a mortgage commitment signed by the borrower.
4. Funding. The money goes to a lawyer’s trust account; the lawyer confirms title and insurance, registers the charge and advances funds.
5. Servicing. The borrower makes payments, usually monthly, either to the investor or to a mortgage administrator who collects into trust and remits.
6. Maturity. At the end of the term the borrower repays (often by refinancing or selling), the investor agrees to a renewal, or the loan goes into default.
7. Enforcement, if needed. The investor, through a lawyer, uses the remedies of the province where the property sits.

That last step is where direct investing differs most from a pooled fund. In Ontario, enforcement is usually by power of sale under the Mortgages Act. In British Columbia it is judicial foreclosure or a court-ordered sale, with an order nisi and a redemption period. In Alberta it is a court-supervised process. Each takes time and money, and in a direct mortgage both fall on the investor first.

Can I choose the specific mortgage I invest in?

Yes — in direct mortgage investing, choosing the loan is the defining feature. You see one file, and you fund it or you do not. In a mortgage investment corporation (MIC) the investor buys shares and the manager chooses the loans; the trade-offs are set out in detail in MIC vs investing in mortgages directly.

Choice brings responsibility: when you pick the loan, nobody else’s capital sits beside yours to absorb a loss.

What a direct investor controls — and what each choice costs

Every lever a direct investor controls has a risk attached to it. The table below sets them side by side. Basis of comparison: a whole first or second mortgage on one residential property, held directly by one investor.

Neither direct lending nor a pooled structure removes these risks; they arrange them differently.

What does a whole mortgage investment look like in numbers?

A whole mortgage produces one borrower’s interest, less servicing costs, less tax. The illustration follows one loan through a normal year and then a default. Higher yields come with higher risk; the numbers are assumptions, not market rates.

Worked example (illustrative)

An investor funds a whole first mortgage on a semi-detached house in Hamilton, Ontario, appraised at $800,000.

• Loan: $480,000, so loan-to-value is $480,000 ÷ $800,000 = 60%.
• Term: 12 months, interest-only, at an assumed 9.5% a year.
• Administration charge: an assumed 0.5% a year of the loan, paid to a licensed mortgage administrator.

If the borrower pays as agreed:

• Interest: $480,000 × 9.5% = $45,600 a year, or $3,800 a month.
• Administration charge: $480,000 × 0.5% = $2,400.
• Net interest before tax: $45,600 − $2,400 = $43,200, which is 9.0% on $480,000.
• Tax in a non-registered account at an assumed 40% marginal rate: $43,200 × 40% = $17,280.
• After tax: $43,200 − $17,280 = $25,920, or 5.4% on $480,000.

If the borrower stops paying after six months:

• Arrears by the time of sale (six missed payments): 6 × $3,800 = $22,800.
• Amount owing: $480,000 + $22,800 = $502,800.
• Assume the house sells under power of sale for $680,000 (15% below the appraisal) and enforcement costs — legal fees, commission and carrying costs — total $60,000. Net proceeds: $680,000 − $60,000 = $620,000.
• The first mortgage is repaid in full: $620,000 − $502,800 leaves $117,200 for anyone ranking behind it.

Now suppose the investor had instead funded a $160,000 second mortgage behind that same first, at an assumed 12% (combined loan-to-value $640,000 ÷ $800,000 = 80%). Six missed payments of $1,600 add $9,600, so the second is owed $169,600. Only $117,200 is left after the first is paid, a shortfall of $52,400. Of the $160,000 principal, $42,800 — about 27% — is lost, and the $9,600 of interest is never received. Same house, same price drop; the security position and loan-to-value made the difference. Mortgage investments are not guaranteed, and principal can be lost.

What to check before funding a direct mortgage

A direct investor does the due diligence a fund manager would otherwise do. The fuller list is in the mortgage investor’s due diligence checklist; the core items are:

• Borrower identity, credit and ability to pay — the mortgage application, credit report and income documents.
• Property value — an appraisal by an accredited appraiser, addressed to the lender, showing the as-is value.
• Title, prior charges, liens and property-tax status — the title search and a tax certificate.
• Balance and standing of any prior mortgage (for a second) — the first mortgagee’s statement.
• Rate, term, fees, prepayment and default terms — the mortgage commitment and the charge terms.
• Exit plan and fallback — the brokerage’s submission.
• Insurance — the property insurance policy naming the lender as mortgagee.
• Registration — the lawyer’s reporting letter and a copy of the registered charge.
• Servicing terms — the administration agreement: charges, remittance timing, reporting and default handling.
• Licensing — the brokerage’s and administrator’s licence status on the provincial regulator’s public register.

Who services a direct mortgage, and does that firm need a licence?

Most direct investors use a mortgage administrator, a firm that collects payments into trust, remits them, follows up on arrears and coordinates renewals and enforcement. Whether that firm needs a licence depends on the province; the role is explained in mortgage administrators and why they matter.

Regulatory information below is current as of October 2026.

• Ontario. Mortgage brokerages, agents and mortgage administrators are licensed by the Financial Services Regulatory Authority of Ontario (FSRA) under the Mortgage Brokerages, Lenders and Administrators Act, 2006. For example, Lendmax Inc., which administers the Lendmax Capital MIC portfolio, holds FSRA Mortgage Administrator Licence 13002.
• British Columbia. The regulator is the BC Financial Services Authority (BCFSA). The Mortgage Services Act, which replaces the Mortgage Brokers Act, is scheduled to come into force on 13 October 2026 and makes mortgage lending and mortgage administration licensed activities. Check BCFSA for the licensing categories that apply.
• Alberta. Mortgage brokers are regulated by the Real Estate Council of Alberta (RECA) under the Real Estate Act. Check with RECA whether a particular administrator needs a licence.
• Québec. Mortgage brokerage has been regulated by the Autorité des marchés financiers (AMF) since 1 May 2020, and the security is a hypothec under civil law rather than a charge.

Once two or more investors share a loan, it becomes a syndicated mortgage, which brings additional securities-law rules.

Can a direct mortgage be held in an RRSP, RRIF or TFSA?

Sometimes, through a self-directed plan whose trustee holds the mortgage in the plan’s name. Whether it works depends on the trustee’s own acceptance rules and on the Income Tax Act.

The key question is whether the mortgage is an arm’s length mortgage investment. If the borrower is the plan holder, or someone not dealing at arm’s length with the plan holder, the loan can fall under the prohibited-investment rules in section 207.01 of the Income Tax Act, which carry penalty taxes. The Canada Revenue Agency explains these rules in its income tax folio on prohibited investments. The mechanics for each plan type are covered in holding mortgage investments in an RRSP, TFSA or RRIF. Tax information is as at October 2026; confirm the position for your plan with the trustee and a Canadian tax professional before funding.

Common mistakes direct mortgage investors make

These come up repeatedly in investor questions and regulators’ investor guidance.

• Relying on the summary instead of the documents. A one-page deal sheet is not the appraisal, the title search or the commitment.
• Reading loan-to-value off the wrong number. Loan-to-value against a purchase price, an owner’s estimate or an as-complete value is not the same as loan-to-value against an independent as-is appraisal.
• Putting most of the capital in one loan. A whole mortgage concentrates risk by design.
• Underestimating enforcement. Legal fees, commission, carrying costs and court timelines reduce what comes back.
• Not confirming where the money sits. Payments are meant to flow through a trust account held by a licensed party.
• Expecting capital back exactly at maturity. Borrowers may ask to renew or extend.

Direct mortgage or MIC: how investors weigh the choice

There is no general answer to whether lending directly beats a MIC. Direct lending gives choice, transparency and registered security in the investor’s favour, at the cost of concentration and personal responsibility for enforcement. A MIC spreads capital across many loans under a manager, at the cost of fees, reliance on that manager and redemption terms that can include notice periods, deferral or suspension.

Investors with time to review files, capital to spread across several loans and capacity to absorb a single loss might consider direct lending; those who prefer diversification and delegated underwriting might consider a pooled structure. The alternatives are set side by side in mortgage investment structures compared.

What this means for a mortgage investor

Direct mortgage investing answers “can I choose my mortgage?” with a clear yes, and the price of that choice is concentration and personal responsibility for the outcome. The income is the borrower’s interest less servicing costs and tax; the protection is the equity below the loan and the province’s enforcement process, neither of which removes the possibility of loss. Before funding, every direct loan can be read along the seven axes on which mortgage investments vary: the borrower, the property, the loan-to-value, the security position, the term, the jurisdiction and the investment structure.