The Influence of MICs on Mortgage Rates and Availability

The Influence of MICs on Mortgage Rates and Availability

To begin investing in real estate in Canada, one must thoroughly understand the complex workings of Mortgage Investment Corporations (MICs). We examine the impact of MICs on mortgage rates and availability in the Canadian market at Canguard, your reliable mortgage fund partner. Come along with us as we provide you with the knowledge you need to make wise decisions about your real estate activities.


What Is a Mortgage Investment Corporation?

A Mortgage Investment Corporation (MIC) is an investment fund that pools capital from investors to lend borrowers in the form of private mortgages. The portfolio of loans are secured against Canadian real property. According to the Income Tax Act of Canada, MIC shares can be invested in TFSAs, RDSPs, RRIFs, or RESPs.  

A unique component of MICs is that they are subject to a special tax regime under the Income Tax Act (“ITA”), whereby MICs distribute 100% of their net income to shareholders. This structure permits more attractive returns for shareholders because MICs can offer competitive terms due to the lack of corporate taxes. 

A diagram that shows the operation and structure of MICsNavigating the MIC Structure

Let’s unravel the Mortgage Investment Corporation (MIC) process:

1. Corporate Hub:

At the core is the corporation. Investors inject capital by purchasing shares, empowering the MIC to lend to borrowers and fostering a symbiotic relationship in the mortgage cycle.

2. Borrowers in Focus:

Those in need become borrowers. Upon mortgage approval, they access funds, committing to monthly payments covering the interest—integral to this financial dance.

3. Investor Role:

Investors play a crucial part in expanding portfolios through tailored MIC shares. Staying invested for  longer periods often means higher yields, with interest payments contributing to overall profit.

A MIC thrives on the synergy between borrower needs, and investor capital—a dynamic interplay vital to Canada’s real estate financing landscape.


How MICs Affect Mortgage Rates and Availability

Mortgage Investment Corporations (MICs) greatly influence mortgage availability and pricing in Canada. 

When considering a mortgage from a MIC, it’s crucial to weigh the expenses and risks involved thoroughly. Although MICs can be a good option for people who can’t get a mortgage through traditional channels, it’s important to read the terms and conditions and consider how the higher interest rates might affect your financial status. It’s also a good idea to make an informed choice by consulting a mortgage broker or financial advisor.

House model, coins, and chart model showing the impact of MICs on mortgage ratesHow Do MICs Differ from Traditional Banks in Terms of Mortgage Approval Process in Canada

In Canada, Mortgage Investment Corporations (MICs) are distinct from typical banks in many important respects, most notably regarding the mortgage approval procedure:

  •  Interest Rates: Compared to the lower rates offered by traditional lenders like banks, MICs frequently charge higher interest rates.
  • Mortgage Terms: MICs often have much shorter terms compared to traditional lenders. The loan periods are often anywhere from 6 months to 2 years.
  • Flexibility: MICs are free from the same constraints as banks, allowing them to provide various loan products and assume various risks.

Because of these distinctions, MICs are a desirable option that may yield larger profits for investors and give people who could not get a mortgage from a typical bank another funding source. To make an informed choice, anyone considering a mortgage from a MIC should carefully weigh the costs and risks involved and consult a specialist.


The Bottom Line

To sum up, exploring the complex realm of Mortgage Investment Corporations (MICs) demonstrates a dynamic interaction between investors, borrowers, and the corporate center. This synergy supports the market’s vibrancy and is the backbone of Canada’s real estate financing landscape. MICs in Canada affect availability of mortgages, rates, and the real estate market as a whole. Understanding the role of MICs becomes crucial for individuals navigating the intricacies of real estate financing to make educated judgments and navigate the always-changing Canadian real estate market.

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This website is provided for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. No securities regulatory authority has assessed the merits of these securities or the information contained in this website. Potential Investors should conduct their own due diligence before investing. All statements in this website, other than statements of historical fact, that address events or developments that Canguard expects to occur are forward looking statement. These forward-looking statements generally can be identified by the use of words such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “believe” or “continue”, or the negative thereof, or similar variations. Please see the Offering Memorandum for a complete description of the risks associated with investing in Canguard Mortgage Investment Corporation. Purchase of Canguard Shares may be made through Kite Financial Solutions Ltd or a Dealer/Advisor.

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