A MIC (Mortgage Investment Corporation) is an investment fund where investors pool their money to lend to borrowers as private mortgages. MICs are commonly used in Canada as a form of real estate investment.
When investors pool their money, they are purchasing shares, which creates an alternative fixed-income investment (fixed income securities pay investors a fixed or defined amount on predetermined dates).
MICs were created as a result of Section 130.1 of the Income Tax Act, a federal statute, to allow investors to invest in a pool of mortgages.
- Shareholders invest their capital into the MIC (the Fund)
- The MIC may also borrow money from the banks in the form of loans (different MICs have different agreements with banks);
- The MIC uses investor capital and the loan from the banks to fund the Mortgage Portfolio; meaning the money within the Fund is loaned out as mortgages to borrowers;
- When the borrower begins to make their mortgage payments, the interest and fees, are pooled back into the Fund;
- The MIC pays its shareholders their dividends and repays the loan interest to the banks.
MICs are subject to regulatory requirements and oversight, ensuring compliance with securities laws and investor protection. In Ontario, the Ontario Securities Commission is the regulatory body responsible for the management and operation of MICs. The Income Tax Act requires mortgage investment corporations to distribute 100% of net income, as verified by independent audit, to shareholders by way of dividends. Typically, MICs are also overseen by a Board of Directors, responsible for strategic oversight.
Choosing the Right MIC
Choosing which MIC is right for you is not as simple as who has the highest return on investment (ROI). It’s important for investors considering a MIC to carefully assess the portfolio composition, the MIC’s track record and its mortgage underwriting process. To learn more about choosing the right MIC for you, read here. It is also strongly recommended that investors assess their own overall risk profile before they choose to invest in a MIC. Consulting with a financial advisor or professional is beneficial to the investor in order to understand the specific details and risks associated with a particular Mortgage Investment Corporation.
Since 1994, our goal at Magenta has been to empower our investors to build for their tomorrows and achieve peace of mind. Magenta has delivered strong returns and reliable income to our investors while safeguarding capital by applying a risk-mitigated portfolio strategy. The portfolio is constructed of residential, primarily first mortgages located exclusively in carefully selected Ontario markets.
Investing with Magenta offers:
- Regular income
Our team of experts will work with you every step of the way to keep you informed and assist you with investment information so you can determine what best suits your needs.
Liked this blog? For more content like this, click here.