Mortgage Investment Corporations have come a long way since their founding in 1973. Today, MICs are increasingly popular among Canadian investors due to their balanced risk-reward profiles, making them a powerful way to grow capital.
However, not all MICs are created equal. Successful investors understand that like all investments, mortgages carry risks — and those risks must be managed through due diligence, professional management, and transparency.
What Maximum LTV Ratio Does the MIC Keep?
The loan-to-value (LTV) ratio reflects the MIC’s risk tolerance. A higher LTV offers less protection in case of a decline in property value.
Is the MIC Private or Publicly Traded?
Public MICs may offer more liquidity but are more exposed to market volatility. Private MICs tend to be more insulated from external fluctuations but may come with reduced flexibility in exit options.
When Can You Expect Income?
MICs can distribute earnings monthly, quarterly, or annually. Some investors value regular cash flow, while others prefer larger periodic payments.
Does the MIC Have a Good Reputation?
Ongoing or pending litigation may negatively affect a MIC’s operations and investor confidence — especially in publicly traded companies. MICs must also comply with government regulations to retain their tax-advantaged status. A loss of MIC designation can result in earnings being taxed before distribution.
How Diverse Is the Portfolio?
Portfolio diversification reduces risk. MICs must invest at least 50% of assets in mortgages. The remainder can be allocated to commercial, industrial, or real estate-related loans. A highly concentrated portfolio can signal poor diversification and added risk.
Do They Choose Borrowers Well Enough?
Reviewing borrower profiles is key. While private lending allows flexibility, MICs should avoid taking on too many high-risk borrowers. For example, overexposure to non-revenue developers can slow returns and increase default risks.
How Can You Withdraw Your Investment?
Understand the MIC’s redemption or exit strategy. Some impose penalties or waiting periods on early withdrawals. Always review liquidity policies to ensure you’re prepared in case of an urgent need for funds.
What Is the Percentage of First Mortgages vs. Second and Third?
MICs can hold second and third mortgages, but too much exposure increases risk. In a default scenario, first mortgages get paid first, often leaving little for junior mortgage holders.
What Are the MIC’s Underwriting Practices?
Well-managed MICs rely on experienced underwriters, legal teams, and valuation experts to minimize risk. Lending decisions should be based on sound financial criteria and real estate valuation practices.
Does the MIC Have a History of Stable ROI?
Past performance isn’t a guarantee, but it helps set expectations. Review the MIC’s return history, stability, and how it performs in different market conditions. Transparency in performance reports is key to investor trust.
There’s no universal “correct” answer — it depends on your personal risk tolerance and financial goals. However, asking the right questions will help you identify the most suitable MIC for your portfolio. And if you need help, our team is here to support you.
