There are many ways to make a fortune in real estate, including real estate loans. The Mortgage Investment Corporation (MIC) lends money to Canadian businesses and citizens, often at higher interest rates and shorter terms than traditional bank loans.

Mortgage investments are becoming a more mainstream investment option for both individual and institutional investors. Making money from debt continues to evolve into more complex strategies. Investing in a MIC can offer high returns — but also carries risks.

How a Mortgage Investment Corporation (MIC) Works

MICs lend to borrowers using real estate as collateral. The MIC inspects the property, ensures it meets standards, and then mortgages it. Loan terms are typically short (a few months to 10 years), and interest rates are higher to compensate.

MICs make a profit from these high-interest rates and associated fees. If the borrower defaults, the MIC sells the collateral to recover the loss. Investors passively invest capital in MICs, meaning they don’t have to manage day-to-day operations like those who buy individual mortgages.

Typically, MICs lend no more than 80% of the value of the property. The higher the loan-to-value (LTV) ratio, the greater the investment risk.

 

The Risks of Mortgage Investment Corporations

Like all investment vehicles, MICs carry risks — and not all MICs operate the same way. Here are the key risks to consider:

Fluctuations

Real estate price fluctuations can affect the value of collateral. A drop in property value may reduce the MIC’s ability to recover funds if a borrower defaults.

Loan Quality

While MICs conduct borrower background checks and follow stricter standards than banks, poor loan quality still poses a risk if repayments are not made as agreed.

High Administrative Fees

Investors may face administrative fees charged by MICs for managing capital and mitigating risks.

Liquidity Mismatches

In times of mass redemptions, MICs might not have the liquidity needed to pay investors promptly, especially if mortgage assets are not immediately liquid.

 

Benefits of Mortgage Investment Corporations

MICs manage a diverse range of mortgages from different investors and generate income through interest payments. Benefits include:

A Secure Investment

Diversification minimizes impact from a single mortgage default. Foreclosures don’t halt overall income flow.

Investment Pool and More Income

MICs can generate 5%–10% annual returns and monthly cash flow. These earnings can qualify for tax-advantaged accounts like a TFSA or RRSP.

According to Canadian income tax law, MIC shareholders receive tax benefits that draw capital into the Canadian mortgage market.

A Network of Professionals

MICs are managed by experienced underwriters who assess and oversee all mortgage investments.

Diversified Portfolio

Funds are allocated across multiple mortgages, increasing portfolio stability and reducing individual asset risk.

What Investors Should Consider About MICs

  • Choose MICs that prioritize risk management, have strong leadership, and hold high-quality assets for consistent long-term yields.
  • Maximize tax benefits by investing through a registered savings plan such as RRIF, RRSP, RDSP, RESP, or TFSA.
  • Don’t rush to diversify. Research the real estate markets MICs invest in. Cities like Toronto and Vancouver remain top choices despite policy changes.
  • Instead of capital gains, investors earn dividends paid monthly or quarterly. As your investment grows, so does your dividend income.

Be well-prepared when investing in MICs. Consider the full risk-reward profile before investing. While they can be attractive vehicles for income, align MICs with your financial goals and risk tolerance. Reach out to us for tailored professional guidance.