What is a Mortgage Investment Corporation?

Main content

December 14, 2021

When it comes to investing, risk, returns, and consistency are all important elements to consider when evaluating your options. If you are looking for a stable, diverse, and consistent option, a Mortgage Investment Corporation may be the perfect choice for your preferences and goals. As one of British Columbia’s top providers of real estate focused investments and credit products, the team at PHL Financial knows how beneficial a MIC can be for various investors. That is why we have provided some information to help potential investors understand what a Mortgage Investment Corporation is and the rules they abide by.

Learn why you should use a Mortgage Investment Corporation.

Mortgage Investment Corporations – An Overview

A Mortgage Investment Corporation, commonly abbreviated as MIC, is an investment and lending company that allows investors to pool funds in a diversified and secured portfolio of residential and commercial mortgage loans. MIC shares are qualified investments under the Canadian Income Tax Act (Section 130.1) for RRSPs, RRIFs, TFSAs, or RESPs. The pool of mortgages is continuously managed by a team of skilled and experienced managers. These managers are responsible for all aspects of the company’s operations, including the sourcing of suitable mortgage investments, the analysis of mortgage applications, the negotiation of applicable interest rates, terms, and conditions, instruction of solicitors, and general administration. Newly invested share capital and the proceeds of repaid/discharged mortgages are utilized to fund new mortgages, ensuring stable cash flow.

Important MIC Rules and Standards

Every MIC must adhere to the following rules and standards:

  • A Mortgage Investment Corporation must have at least 20 shareholders.
  • No shareholder may hold more than 25% of the MIC’s total capital.
  • A MIC may invest up to 25% of its assets directly in real estate but may not develop land or engage in construction. This ceiling on real estate holdings does not include real estate acquired as a result of mortgage default.
  • At least 50% of a MIC’s assets must be comprised of residential mortgages, and/or cash and insured deposits at Canada Deposit Insurance Corporation member financial institutions.
  • A MIC is a flow-through investment vehicle and distributes 100% of its net income to its shareholders.
  • A MIC’s annual financial statements must be audited.
  • A MIC may employ financial leverage by using debt to partially fund assets.
  • All MIC investments must be in Canada, but a MIC may accept investment capital from outside of Canada.
  • Each MIC is a tax-exempt corporation.
  • MIC shares are qualified RRSP and RRIF investments.
  • A MIC may distribute income dividends and capital gain dividends. The former is typically interest from mortgages and revenue from property holdings, while the latter is typically from the disposition of real estate investments.

To learn more about Mortgage Investment Corporations and the benefits they offer to their investors, get in touch with the team at PHL Financial. We can be reached through our online contact form or by phone at 604-579-0849 and will be happy to answer any questions you may have.