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What Makes Mortgage Funds An Excellent Investment?

Mortgage Funds

Investing in the right financial tools is a crucial decision that can profoundly impact your future. 

With so many options available, determining which investment best suits your needs can be challenging.  

But have you considered mortgage funds? 

Because of multiple benefits, they have become one of the more popular investment options in recent years. They’re pooled investments that allow investors to infuse capital in a diversified portfolio. 

So, why should you consider going with them for yours? Let’s find out in this article.

Mortgage Funds 101  

When investors put their money into a mortgage fund, the amount is combined with that of other investors and used to purchase mortgages. Real estate typically secures these mortgages, with borrowers pledging their property as collateral.  

The fund earns income from the interest paid on the mortgages, which is then distributed to investors through regular payments. As each one gets repaid, the mortgage fund may reinvest the proceeds into new mortgages, providing investors with multi-tiered sources of steady income.  

You can invest directly in a mortgage fund or through a managed fund. Investment rates and conditions for the latter vary. But firms like ASCF can provide you with great terms on the market, ensuring profitable returns.   

Below are compelling reasons that can make mortgage fund investments excellent choices:

1) Stable Returns

One of the primary reasons why mortgage funds are so popular is their stable returns. As mentioned, they invest in mortgages secured by real estate. If a borrower defaults on the loan, the lender can foreclose the property and sell it to recover their investment. This makes mortgage funds relatively low risk, as the underlying asset is tangible and has value.

Mortgage funds typically offer investors a fixed rate of return, which is paid out regularly. This means that investors can expect a steady stream of income from their assets, making mortgage funds an excellent option for those looking for reliable passive income.

2) Capital Growth 

The value of mortgage funds can increase over time, meaning you get a huge profit when you sell your investment eventually. This is because property values tend to rise over time, with borrowers’ interest rates going right along with them. 

Because funds enable investors to own real estate assets without the associated costs like taxes, insurance, and maintenance fees, they can enjoy their revenues fully.   

3) Diversification

Another advantage of investing in mortgage funds is diversification. Mortgage funds invest in a portfolio of mortgages, meaning the risk is spread across multiple loans. This reduces the risk of default and provides investors with more stability.

Investing in mortgage funds also provides diversification across different types of properties and borrowers. As such, investors aren’t reliant on a single property or borrower and exposed to various risks.

4) Liquidity

Mortgage funds are also a liquid investment, meaning investors can buy and sell their shares on an exchange. That allows investors to sell their shares if they need to raise cash quickly.

However, it’s important to note that the value of the shares can change based on market conditions. Investors may not receive the full value of their investment if they sell during a market downturn.

Mortgage Funds

5) Inflation Hedge

Inflation can erode the value of cash investments over time. But mortgage funds provide a hedge against that. Because mortgage interest rates are typically adjusted for inflation, investors can benefit from higher returns during such economically challenging times.

6) Tax Benefits

Investing in mortgage funds can also provide tax benefits. In Australia, mortgage funds are classified as managed investment schemes. This means that they are eligible for certain tax concessions. 

For example, investors may claim deductions for management fees and other investment-related expenses. Additionally, investors may be eligible for capital gains tax concessions if they hold their investment for more than 12 months.

7) Social Impact

Investing in mortgage funds can also have a positive social impact. When done right, mortgage funding enables individuals and families to purchase homes more easily. 

For instance, some digital mortgage marketplaces offer 10% discounts on their listed homes’ purchase prices. This indirect impact supports the housing market and contributes to positive social outcomes. 

More importantly, it provides stability and security for families while boosting local economic development.

Reconsider Your Investment Strategy

Mortgage funds are an excellent investment option for those looking for low-risk investments that offer stable returns, diversification, liquidity, and an inflation hedge.  

However, as a precaution, do your research before investing in one. Ensure you understand the caveats involved and choose the right fund for your investment goals. 

Whether a new or seasoned investor, you can enjoy multiple benefits by relying on reputable fund managers to handle your portfolio efficiently.

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