General Investment Questions
A mortgage is simply a debt instrument secured by a registered charge on real estate. It secures an agreement by the borrower (mortgagor) to the lender (mortgagee) to pay a certain amount of money on stipulated terms and conditions. A mortgage is registered in the Land Titles Office and cannot be removed other than with the consent of the lender or by a court order.
Holding a registered mortgage against 'real property' allows you to invest in the loan that the mortgage secures with the knowledge that if the borrower reneges on their obligation to pay there is a legal right to sell the property to recover the debt.
Investments in private mortgages can consistently earn between 6.00% and 15.00%pa depending on the degree of risk you wish to take. Earnings can be re-invested in La Trobe Financial's pooled accounts to provide you with an even greater return. This investment return can compare favourably with other forms of investments.
Mortgage investments are secured by tangible assets that you can 'touch and feel'. Typically the loans which are secured by a mortgage are based on a percentage of the appraised value of the real estate security also referred to as the Loan to Value Ratio (LVR). By combining a lower LVR with short loan terms (the length of time the loan is outstanding) the likelihood of the value of the real estate security dropping below the value of the mortgage is, in a normal market, considered minimal.
Mortgage investments can have a stated interest rate for the length of the loan that typically is constant. You know what you will earn on your investment when you make it unless it is a variable rate.
Investment in a range of 'Select Mortgages' can reduce the volatility associated with individual market segments, and accordingly help you protect your assets.
You choose the real estate mortgage that you think is right for you
A unique feature of La Trobe Financial's Credit Fund is our 'Select Investment Account' which means before you invest, you and your financial adviser can review the details of the borrower and the proposed loan, including investment term, interest rate, and payment terms together with a description of the project or property used as security for the loan. Based on this information, and your own personal circumstances, you make the decision to invest or not.
Loans that are secured by a first and second mortgage can include the following purposes:
A credit fund is a trust structure that is operated by a fund manager which invests in various asset classes including loans secured by mortgages over real estate property.
Our Credit Fund receives investors' money and uses it to grant loans secured by mortgages. You, as an investor, then receive the investment returns on those mortgages, after the Investment Manager deducts fees and expenses in running and operating the Credit Fund. These loans can be secured by mortgages over retail, commercial, construction and development, industrial or residential properties. A credit fund is not a debenture scheme, as each investment is held in trust on behalf of the investors in the fund.
Through the La Trobe Financial Credit Fund, La Trobe Financial sources and assesses loans on behalf of our investors. We take care of all the work for you by dealing directly with the borrowers. You then select the investment opportunities you wish to invest in.
LVR stands for "Loan to Valuation Ratio". It is the loan amount compared to the valuation amount of the property offered as security for the loan. The higher the LVR the less equity the borrower has in the property used as security for the loan. It is generally safe to say that the higher the LVR, the greater the risk, all other things being equal.
Investing With La Trobe Financial Questions
We employ trained professionals who have obtained the experience required in order to operate the Credit Fund. This ensures we provide a level of care, a knowledge of mortgage products and other asset classes and a standard of service to meet your investment needs. Our wealth of
lending experience allows us to quickly review and qualify property for lending.
Our role is to find and structure deals that are suitable for mortgage financing. Once the loan is pre-approved by us, we make the investment opportunity available to the Credit Fund members. For this service we are paid a fee by the borrower, not by the investor.
La Trobe Financial is committed to product excellence, investment security and service. We have over 65 years of experience in real estate financing and asset management. We draw from these years of experience in the financial industry to serve your mortgage investment needs. All investments are vetted through a credit analysis process prior to them being presented to you, the investor. Seeking to preserve your capital is first and foremost in every investment opportunity we review. Our commitment to excellence includes the following criteria:
Nothing. All upfront costs are paid by the borrower at the application stage of the mortgage and there are NO investment ENTRY FEES . You as the investor do not pay any establishment fees in relation to your investment. All establishment and loan management fees are paid by the borrower. La Trobe Financial does not charge a Trustee fee. The “Fees & Charges” section of the Product Disclosure Statement (PDS) details fees that may be payable by you as investor.
Persons who are not Australian Residents are allowed to invest in registered managed investment schemes such as the Credit Fund and will, in most cases, only pay 10% of the investment returns earned each month as a withholding tax.
The minimum investment for the Classic 48 hour Account and the 12 Month Term Account is $10.00 and for the Select Investment Account, $1,000.00; the maximum amount is unlimited for the 12 Month Term Account and Classic 48 hour Account. Select Investment Accounts are limited to the amount of funds required for investment in each loan. Our High Yield Credit Portfolio has a minimum investment amount of $250,000. La Trobe Financial however, reserves the right to reject an investment amount if it is not in the best interest of all investors.
La Trobe Financial has appointed Perpetual Corporate Trust Ltd as the Custodian of the Credit Fund and it is listed on the title as the mortgagee. The benefit of this is that substitutions of mortgage investments can be processed immediately without the delay of having a transfer of mortgage completed.
No. If you utilise the Select Investment Account or High Yield Investment Account a Supplementary Product Disclosure Statement (SPDS) is provided to you detailing the specific details of the investment you are considering. Once you have signed and returned the SPDS to La Trobe Financial, you have made a commitment to invest.
We endeavour to send SPDSs to you the same day you have requested them. SPDSs can be faxed, emailed and posted to you. It is important to note that your investment can only be placed in the mortgage investment selected when La Trobe Financial has received your original signed SPDS and holds clear funds for investment.
Yes, register via our website to access our online investor platform La Trobe Direct.
La Trobe Direct gives you 24/7 user friendly, safe and secure access to your investment accounts with the ability to review your balances and transactions as well as make new investments.
To assist with the registration process you will need the following on hand:
La Trobe Financial currently pays Authorised Representatives a fee for introducing investors to the 12 Month Term Account or Select Investment Account and High Yield Investment Account of the Credit Fund.
The Fund does not guarantee investors' capital. The following order of priority applies to payment of money received following a mortgagee sale in accordance with the PDS and La Trobe Financial’s obligations at law:
Please take time to read through the Product Disclosure Statement (PDS) regarding our managed investments and discuss it with your
financial adviser. In preparing the PDS, we have not taken into account your investment objectives, financial position or particular
needs. Before making an investment decision, you may need to obtain and consider independent advice about whether the investment is
suitable in light of your individual or personal circumstances.
La Trobe Financial and its Authorised Representatives do not provide financial product advice.
Investor Reporting Questions
Investors receive electronically (and by post at investor choosing) the following regular reports:
We aim to provide investors with up-to-date information about the Credit Fund, to help investors monitor their investments in the Credit Fund. In addition, information that is not materially adverse is subject to change from time to time and may be updated. You can obtain up-to-date information about the Credit Fund at any time by:
We will acknowledge receipt of your investment within 5 business days of receipt. Your money will be invested once your funds have been cleared, and you will start earning a return immediately.
Investment Options Questions
We cannot recommend or suggest any one specific mortgage investment or Credit Fund account over another as we are not licenced to provide "financial
product advice". We can however give you factual information about the products of the Credit Fund and the Credit Fund
itself and we leave the choice up to you.
For instance you have four (4) investment choices for your money in the Fund :
These investment options are very rare and La Trobe Financial does not offer them with any frequency.
Second mortgages attract a higher interest rate due to higher risk. A second mortgage is second in priority to the first mortgage. This means that the second mortgage does not receive any funds until the first mortgagee has received all their entitlements i.e. principal and all interest and fees. Ultimately it depends on, among other things, the security property and the performance of the borrowers; there is still investment risk (refer to the PDS) involved and a second mortgage would be considered riskier than a first mortgage.
With the 12 Month Term Account you share the investment risk with all other investors in the 12 Month Term Account. You don't receive Late
Payment Fees with the 12 Month Term Account as the investment return is paid to you each month.
With the Select Investment Account & High Yield Investment Account the performance of each investment you make is directly related to the performance of the investment you have selected. The investment return cannot be paid to you unless the borrower has made their interest payment. If the borrower makes a payment late you may be entitled to receive half of any Late Payment Fee collected. If a Select Mortgage repays early, you may also be entitled to receive half of one month's interest if an Early Repayment Fee is collected, this will depend on the loan type and is at the discretion of La Trobe Financial.
Yes. A minimum investment of $1000 applies to the Classic 48 hour Account and 12 Month Term Account. Generally, both the Select Investment Account and High Yield Investment Account require a $1000 minimum investment, although this may be varied in the SPDS made available to investors. Our High Yield Credit Portfolio has a minimum investment amount of $250,000
La Trobe Financial's lending guidelines as applied to "Select Investment Account & High Yield Investment Account" will also apply to loans funded by the "12 Month Term Account". Whilst the Fund can accommodate loans to a maximum LVR of 75%, only prime residential securities will be considered
to this level. Generally the maximum LVR of 66% will apply, with lower LVRs for Commercial (up to 70%) Rural (up to 55%) and specialised
securities. The 12 Month Term Account does not invest in loans which are secured by a second mortgage.
See the Product Disclosure Statement for more details.
The interest of an Investor in the 12 Month Term Account is as a tenant in common; in the same proportion as the amount the investor has invested to the total amount invested by all investors in the 12 Month Term Account.
No. Investments in the 12 Month Term Account or the Classic 48 hour Account are made through the Product Disclosure Statement only. Once an investor has completed the Credit Fund Application Form and ticked the 12 Month Term Account or the Classic 48 hour Account, there is no further paperwork required to invest in these options.
Investment Risk Questions
The risks of the investment are outlined in the
Product Disclosure Statement but may be summarised as:
Value of Underlying Real Estate
Mortgages are generally considered low risk investments in a stable or rising real estate market because they are backed by real property. In a declining market, the value of the underlying real estate must drop to below the value of the mortgage registered against the property and recovery costs before the investment is at risk. Based on the expected changes in the market, the LVR at the time of the initial loan is set conservatively to reduce the risk of loss.
Funds Held in Trust
Moneys invested by you are held "in trust" by La Trobe Financial to be used only for the agreed purpose. When payments are received from the borrower, these amounts are also held "in trust" until distributed back to you, the investor. These trust funds and the transactions related to them are regulated by the Corporations Act, are audited annually, and may be subject to review by the Australian Securities and Investments Commission (ASIC) which is responsible for licensing Managed Investments Schemes. The integrity and soundness of the Investment Manager is critical. We are regulated by ASIC and not Australian Prudential Regulation Authority (APRA). Your investment in the Credit Fund is not a bank deposit.
The Product Disclosure Statement at section 8 entitled "Investment Risks" outlines other risks and you should read this before investing.
Credit funds can provide Investors with superior investment returns than cash management trusts, and are less volatile than share or equity based investments. Apart from the rate of return, credit funds can give you an extra level of diversification. Given that credit funds are not closely correlated with returns from other asset classes, adding a credit fund to your portfolio may smooth the volatility of your total investment returns.
Investing in credit funds is not without risk, as the value of the underlying security can fluctuate. As such, the lending parameters of each credit fund should be individually assessed to ascertain what levels of risk you are comfortable with. Please read the section entitled 'Investment Risks' and 'Asset Selection Criteria' in the Product Disclosure Statement. You may also choose to discuss these issues with your financial adviser.
Investment Returns And Payout Questions
A number of factors influence the investment returns. These include the type and location of the property and the borrower's credit history. Usually a residential property has a lower interest rate than a commercial or rural property. However this doesn't mean residential properties are less risky. All loans are dependent on the borrower making their payments and repaying the loan.
Prepaid interest is when an amount to cover the interest has been included in the total loan amount or where the borrower has made payments in advance and those payments are held in trust within the Credit Fund. Interest is then paid periodically as detailed in the SPDS. Generally, prepaid interest does not apply to consumer regulated loans.
Prepaid interest means that La Trobe Financial is holding the borrower's future interest payments in trust within the Credit Fund. Prepaid interest provides certainty that interest for the loan term will be paid to you on time. However, it does not provide any greater certainty that the principal will be repaid on time.
Prepaid interest provides certainty that interest payments will be paid to you on time during the prepaid interest period. However, it does not guarantee you against loss. Like all loans, loans with prepaid interest still need to be repaid in full or renegotiated for a further period at the end of the loan term. If the borrowers are unable to meet their loan maturity obligations, La Trobe Financial will start its loan recovery actions.
Investment returns for the Classic 48 hour Account and the 12 Month Term Account are paid monthly in arrears and will be paid as
directed by you either direct to your nominated financial institutions account or reinvested.
Investment returns for Select Investment Accounts will be paid according to the Select Mortgage Investment chosen by you and paid as directed, Usually monthly.
Yes, you can reinvest your investment returns in the 12 Month Term Account. However, it is important to note that reinvested funds requires 30 days written notice to be withdrawn.
Whilst we expect that some loans will fall into arrears, the Credit Fund will continue to distribute an investment return on a monthly basis. It is our intention to pay a consistent return to investors on a monthly basis despite peaks and troughs in receipts from borrowers' interest payments.
The 12 Month Term Account is a fixed term investment of 12 months. Generally early redemptions from the 12 Month Term Account are not permitted. If an early withdrawal is permitted, an early withdrawal fee of 1.5% of the withdrawal amount (minimum $500) will apply.
Select Investment Accounts are treated as fixed term investments. La Trobe Financial is under no obligation to process a withdrawal request during the agreed term of the investment. La Trobe Financial may at its discretion consider requests for withdrawal, only if a substitute investor is available. If a replacement investor is found an early withdrawal fee of 2.5% of the withdrawal amount (minimum $500) will apply.
Investors in the Classic 48 hour Account generally have access to their money 2 business days after La Trobe Financial has received your written notice and we can credit your
nominated financial institution's account with the requested funds#. In the 12 Month Term Account, investments are subject
to a minimum investment period of 12 months. After this time, you can structure ongoing access (refer to PDS) to your cash after the minimum
initial investment period through the Regular Access Investment option. Your complete investment will be rolled over into a further
12 month period unless 30 days written notice is received prior to the maturity date. With the Select Investment Account and High Yield Investment Account, La Trobe Financial is under no obligation to process a withdrawal request during the agreed term of that investment. La Trobe Financial
may at its discretion consider requests for withdrawal, only if a substitute investor in the same mortgage option is available.
Such withdrawal is subject to an Early Withdrawal Fee.
La Trobe Financial generally takes legal action to recover the debt, but in many instances legal action may not be required if a repayment arrangement has been agreed to. If the matter needs to extend to legal action a judgement for possession may be required. Once judgement has been entered against the borrower, La Trobe Financial obtains physical possession of the property and will then market the property for sale. Once the property is sold, settlement usually takes place between 30 and 90 days. Our Asset Management team will provide regular written updates to you on the recovery process, and your monthly Investor Statement will detail the amounts owing to you.