Mortgage Investment Corporations in Canada

This Page's Content Was Last Updated: November 23, 2023
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What You Should Know

  • Mortgage investment corporations (MIC) allow investors to invest in a diversified portfolio of residential and commercial mortgages.
  • You can invest in publicly-traded MICs by purchasing shares on the stock market, while private MICs can have significant minimum investment requirements.
  • MICs are required to pay all of their net income to shareholders in the form of dividends.
  • MICs don’t pay any income tax, while shareholders pay tax on their interest income.

What is a Mortgage Investment Corporation

A mortgage investment corporation (MIC) is a type of company in Canada that pools money from investors to lend out mortgages to borrowers. MICs typically fund Canadian residential mortgages, but they can also lend out or invest in certain other assets. The income that a MIC receives, which is the mortgage interest that borrowers pay, is then distributed to the shareholders of the MIC in the form of dividends.

MICs allow Canadians to invest in a diversified portfolio of mortgages, with other benefits. For example, MICs don’t pay any income tax, which allows them to avoid double taxation and can boost investment returns. In exchange for this, MICs have to follow specific rules based on the Income Tax Act. For example, they can only deal with properties in Canada, and they must invest at least 50% of their assets in residential properties or deposits. Thus, they can invest up to 50% of their assets in commercial mortgages. An MIC should have at least 20 shareholders, none of whom controls more than 25% of the MIC. On this page, we’ll take a look at how MICs work, the benefits of investing in them, and some specific examples of MICs available to investors.

How do MICs work?

MICs are flow-through entities. This means that all of the MIC’s net income goes directly to shareholders. This makes MICs similar to another common flow-through entity in Canada: mutual fund trusts.

Just like mutual funds, investors purchase shares of a mortgage investment corporation. By owning shares, you own a part of the MIC. Dividends are distributed to shareholders based on their share of ownership.

Most MICs are private lenders, meaning they might lend money to subprime mortgage borrowers. This means that these mortgages can be riskier than those that a bank might have in its portfolio, as private mortgage lenders are not regulated. However, this does allow MICs to offer attractive returns and dividends. MICs limit risk by setting a maximum allowed LTV for their portfolio, keeping mortgage term lengths often less than 1-2 years, and focusing on major urban markets in Canada. In general, MICs expect each of their borrowers to have an exit strategy.

Facts About Mortgage Investment Corporations (MICs)

As of 2018, there were 200 mortgage investment corporations lending out $12.5 billion dollars in mortgages. Thus, MICs were funding less than 1% of mortgages in Canada. There were 18 MICs with portfolios of $100 million or more, and 7 MICs were publicly traded. 77% of the loans held by MICs were first mortgages, and the average LTV for the 18 largest MICs was 59%. In 2018, larger MICs had a yield of 7.5%, while smaller MICs had a yield of 7.1%. 18 largest funds had 45% of their holdings in Ontario and 38% of their holdings in B.C. By September 2022, MICs grew their market share to 1.7% of the Canadian mortgage market.

Loan Value Outstanding

As of September 2022

Best 5-Year Fixed Mortgage Rates in Canada CanadaLeaf
Mortgage Term:
Fixed
Variable

Best Mortgage Investment Corporations in Canada

MICLending FocusProperty Type FocusAverage Interest Rate/Dividend YieldAverage Loan-to-Value (LTV)
Urban (Ontario, Alberta, and British Columbia)
  • Single-family homes
  • Construction
  • Commercial
9.3%67%
Urban (GTA, Vancouver)
  • Residential
  • Commercial
8.5%59%
Ontario
  • Residential
  • Construction
  • Commercial
9.1%44%
British Columbia
  • Residential
  • Construction
  • Commercial
  • Agricultural
9.5%54%
Ontario
  • Residential
  • Commercial
9.5%N/A
Ontario
  • Residential
8%68%
Ontario
  • Urban
6% - 11%68%
Western Canada (British Columbia and Alberta)
  • Residential
8%58%
Across Canada
  • Multi-residential
  • Commercial
10.7%67%
Note: Values are as of February 2023

MCAN Investment Summary

Annual Dividend Yield
9.3%
1-Year Stock Return
20%
Average LTV
67%

Note: Stock return values are as of 6 November 2023

mcanlogo

MCAN Financial Group

Minimum Investment: 1 share

Stock Symbol: MKP

Lending Focus: Urban (Ontario, Alberta, and Vancouver)

Property Type Focus:

  • Single-family homes
  • Construction
  • Commercial

Formerly known as MCAN Mortgage Corporation, MCAN Financial Group is a publicly-traded MIC, trading on the Toronto Stock Exchange (TSX) under the ticker MKP. MCAN focuses on single-family residential lending, but they also offer mortgage loans for construction and commercial properties. They operate their own mortgage lender, called MCAN Home Mortgage Corporation, to lend out residential mortgages.

MCAN funds some of their mortgages through deposits they receive in their CDIC-eligible term deposits at MCAN Wealth. MCAN term deposits are eligible for CDIC deposit insurance and are non-redeemable term deposits. They require a minimum deposit of $10,000 for terms of less than 1 year, and $5,000 for terms of 1 year or longer. MCAN uses the funds that they receive from depositors as a way to fund their mortgages.

MCAN refers to the difference between what they pay depositors and what they receive by lending out mortgages as the spread of mortgages over term deposit interest and expenses. In 2023, that spread was 3.5%.

MCAN Fast Facts

  • Average Mortgage Term: 13.1 months
  • Mortgage Portfolio: $4.5 Billion
  • Market Capitalization: $550M

Data as of September 2023

MCAN Mortgage Types

Mortgage TypePortfolio
Single-Family Insured$169 Million
Single-Family Uninsured$626 Million
Residential Construction$553 Million
Non-Residential Construction$5 Million
Multi-Family Commercial$55 Million
Other Commercial$27 Million

MCAN Average Mortgage Rates

Mortgage TypeAverage Interest Rate
Single-Family Insured2.24%
Single-Family Uninsured4.08%
Residential Construction6.42%
Non-Residential Construction7.53%
Multi-Family Commercial5.05%
Other Commercial5.53%

MCAN Mortgages by Province

ProvinceSingle-Family MortgagesShare (%)
Ontario$2.23 billion85.4%
Alberta$186 million7.1%
British Columbia$112 million4.3%
Quebec$36 million1.4%
Atlantic Provinces$31 million1.2%
Other$16 million0.6%

MCAN Mortgage Amortization Periods

Amortization PeriodSingle-Family MortgagesShare (%)
Up to 20 Years$440 million16.8%
Greater than 20 Years to 25 Years$1.48 billion56.7%
Greater than 25 Years to 30 Years$489 million18.7%
Greater than 30 Years$204 million7.8%

MCAN Data Source: 2021 Annual Report

Atrium MIC Investment Summary

Annual Dividend Yield
8.5%
1-Year Stock Return
11.8%
Average LTV
59%

Note: Stock return values are as of 6 November 2023

atrium logo

Atrium Mortgage Investment Corporation

Minimum Investment: 1 share

Stock Symbol: AI

Lending Focus: Urban (Ontario, British Columbia)

Property Type Focus:

  • Residential
  • Commercial

Atrium Mortgage Investment Corporation focuses on residential properties in major Canadian urban centres, namely the Greater Toronto Area (GTA) and Vancouver. They also operate outside of the GTA in Ontario, as well as other areas of British Columbia and Alberta. In addition to first mortgages, they also have a small portfolio of second and third mortgages, as well as commercial mortgages.

Atrium has been paying out monthly dividends, uninterrupted, since 2001. They also pay out a special dividend each February to ensure that 100% of the MIC's net earnings are paid out to shareholders, allowing Atrium to avoid paying any income taxes.

Focused primarily on residential, 88.5% of Atrium mortgages are residential, and 11.5% are commercial. Mid-rise and high-rise residential make up the majority of Atrium's investment portfolio. Atrium's average mortgage was $3.6 million, although most Atrium mortgages are under $2.5 million.

Atrium Fast Facts

  • Average Mortgage Rate: 11.3%
  • Average Mortgage Term: 11 months
  • Mortgage Portfolio: $825 Million
  • Province: GTA (72% of mortgages)

Data as of August 2023

Atrium Mortgage Types

Mortgage TypeNumberAmountShare (%)
High-Rise Residential17$257 million31.4%
Mid-Rise Residential32$245 million30.0%
Low-Rise Residential13$120 million14.7%
House145$105 million12.8%
Condominium12$1.5 million0.2%
Commercial24$89 million10.9%

Atrium Average Mortgage Rates

Mortgage TypeAverage Interest Rate
First Mortgages8.81%
Second/Third Mortgages9.99%
Residential9.44%
Commercial8.84%

Atrium Mortgages by Province

ProvinceMortgagesShare (%)
GTA (Ontario)$547 million66.9%
Non-GTA (Ontario)$34 million4.2%
British Columbia$228 million27.9%
Alberta$8 million1%

Atrium Average Mortgage Rates by Province

ProvinceAverage Mortgage Rate
GTA (Ontario)9.06%
Non-GTA (Ontario)7.44%
British Columbia8.7%
Alberta10.15%

Atrium Data Source: August 2022 Investor Fact Sheet

Cannect MIC Investment Summary

Annual Dividend Yield
9.1%
Annual Fee
2%
Average LTV
44%
mcanlogo

Cannect Mortgage Investment Corporation

Minimum Investment: $10,000

Annual Management Fee: 2%

Exempt Market Dealer: Meadowbank Asset Management

Lending Focus: Ontario

Property Type Focus:

  • Residential
  • Commercial
  • Construction

Cannect Mortgage Investment Corporation is a relatively new MIC, having been in operation for ten years. Cannect focuses mainly on Toronto and the GTA and is a private MIC. This means that you can’t buy shares of Cannect on the stock market. Instead, you'll need to open a Cannect Invest account, with a minimum deposit requirement of $10,000. Investors can open their account online. This includes non-registered accounts, TFSAs, RRSPs, RRIFs, RESPs, joint and business accounts. Cannect Invest registered accounts use Central 1 Trust Company as the trustee.

There might be limits to how much you can invest with Cannect, based on what type of investor you are. Accredited investors have no investment limits, eligible investors can invest up to $30,000, and non-eligible investors can invest up to $10,000. A higher limit of $100,000 applies to investors who receive advice from a portfolio manager, investment dealer, or exempt market dealer (EMD). Meadowbank Asset Management is used as Cannect's EMD.

Cannect positions itself by having a "unique" approach, where they go directly to investors to raise money, they go directly to consumers to lend out money, and they maintain a low loan-to-value (LTV) lending ratio.

Cannect has a larger second mortgage portfolio than other MICs. 40% of Cannect mortgages are second mortgages. However, Cannect also has a lower LTV ratio which reduces its risk.

Cannect MIC charges an annual 2% management fee. They also charge additional fees if you withdraw your investment early. If you withdraw within the first 12 months, you'll be charged a 5% fee. As a private MIC, it also takes time to receive your money. With Cannect, it can take 30 days to withdraw your money.

Cannect Fast Facts

  • Mortgage Rate Range: Up to 15%
  • Average LTV: 52%
  • Mortgage Portfolio: $30 million
  • Province: Ontario (99% of mortgages)

Cannect Mortgage Types

Mortgage TypeShare (%)
Residential67.4%
Commercial17.2%
Construction15.4%

Cannect Mortgage Rates

Interest RateNumber of MortgagesAverage LTV
Less than 8%1736.4%
8% to 8.99%4455.7%
9% to 9.99%3155.5%
10% to 10.99%1862.1%
11% to 11.99%1063.7%
12% to 12.99%563.2%
13% to 13.99%161.9%
14% to 14.99%266.7%

Cannect Mortgages by Province

ProvinceShare (%)
Ontario99.2%
Other Provinces0.8%

Cannect Mortgage Position

Mortgage PositionShare (%)
1st Mortgage56.7%
2nd Mortgage43.3%
3rd Mortgage0%

Cannect Data Source: Offering Memorandum and Cannect

Canguard MIC Investment Summary

Annual Dividend Yield
9.5%
Administration Fee
1.5%
Average LTV
54%
mcanlogo

Canguard Mortgage Investment Corporation

Minimum Investment: $10,000

Annual Administration Fee: 1.5%

Exempt Market Dealer: Kite Financial Solutions Ltd.

Lending Focus: British Columbia

Property Type Focus:

  • Residential
  • Commercial
  • Construction
  • Agricultural

Canguard is a private, open-fund mortgage investment corporation that operates within British Columbia only, with a particular focus on mortgages in Surrey/White Rock and Vancouver. Just over 50% of their mortgages are residential, as required by the Income Tax Act, with a significant number of residential land development and construction loans. They also have commercial and agricultural mortgage loans. While Canguard isn't diversified geographically across Canada, they do spread their investments across British Columbia and in many mortgage types.

Canguard only invests in secured mortgages with a maximum LTV of 75%. Its average mortgage term length is 15 months, with most being 1st mortgages. In 2022, 3.82% of the MIC's mortgages were in foreclosure.

As a private mortgage lender, Canguard has no minimum credit score requirement, no maximum debt service ratio (GDS/TDS) limits, and allows interest only payments. They also allow stated income, which means that borrowers, such as those that are self-employed, do not need to provide proof of income. Canguard charges a lender fee of 1% to 2% to borrowers for terms of 1 to 2 years.

For investors, Canguard charges an annualized administration fee of 1.5%, paid monthly. Investors also do not receive any loan fees, which are usually 1% to 2% of the mortgage principal.

For those looking to open a registered RRSP or TFSA account to invest with Canguard MIC, the trustee is Olympia Trust Company. Only BC residents can invest in Canguard.

Canguard Fast Facts

  • Average Mortgage Rate: 11%
  • Average LTV: 58%
  • Average Mortgage Term: 15 months
  • Dividend Payments: Quarterly
  • Mortgage Portfolio: $195 million
  • Province: British Columbia (98% of mortgages)

Canguard Mortgage Types

Mortgage TypeShare (%)
Residential53.34%
Residential Land Development17.84%
Residential Construction10.79%
Commercial/Agricultural18.03%

Canguard Mortgages by Area

AreaShare (%)
Surrey/White Rock24.29%
Vancouver18.75%
Okanagan12.93%
Tri-Cities/Mission/Maple Ridge12.74%
Fraser Valley11.8%
North & West Vancouver10.91%
Richmond/Burnaby/New Westminster8.58%

Canguard Mortgages by Province

Province# of Mortgages
British Columbia121
Alberta1

Canguard Mortgage Position

Mortgage PositionShare (%)
1st Mortgage87.4%
2nd Mortgage12.6%

Canguard Data Source: Offering Memorandum and Canguard

Firm Capital MIC Investment Summary

Annual Dividend Yield
9.5%
1-Year Stock Return
-9.5%
10-Year Stock Return
5.2%
Average Mortgage Rate
11.1%
firmcap logo

Firm Capital Mortgage Investment Corporation (FCMIC)

Minimum Investment: 1 share

Stock Symbol: FC

Lending Focus: Ontario

Property Type Focus:

  • Residential
  • Commercial

Firm Capital (FCMIC) is a public MIC traded on the Toronto Stock Exchange under the stock symbol FC. One of Firm Capital's main objectives is to provide a return that is 400 basis points greater than 1-year Government of Canada treasury bill yields. They do this by having an investment portfolio with an average rate of 11.1% as of September 2023, allowing for a trailing yield of over 9%.

Firm Capital focuses on Southern Ontario, with 95% of their mortgages being variable mortgages and 76% maturing within 12 months, with an LTV of less than 75%. They've been operating their mortgage investment portfolio since October 1999.

54% of Firm Capital's portfolio is within the Greater Toronto Area (GTA). 33.5% is in Ontario outside of the GTA, with a small number of mortgages in Quebec, Western Canada, and the United States.

Firm Capital Fast Facts

  • Average Mortgage Rate: 11.1%
  • Dividend Payments: Monthly
  • Mortgage Portfolio: $879 million
  • Conventional First Mortgages: 82%

Firm Capital Mortgages by Province

ProvinceShare (%)
Ontario82%
Quebec10.4%
Western Canada5.4%
USA2.2%

Firm Capital Mortgage Position

Mortgage PositionShare (%)
1st Mortgage75.4%
Others24.6%

Firm Capital Data Source: Annual Report and Investor Presentation

RiverRock MIC Investment Summary

Annual Dividend Yield
8%
Mortgage Terms
1 Year
Average LTV
68%
river logo

RiverRock Mortgage Investment Corporation

Minimum Investment: $150,000 ($25,000 for accredited investors)

Annual Administration Fee: 1.25% Series F (2.25% Series N)

Exempt Market Dealer: Donville Kent Asset Management Inc.

Lending Focus: Ontario

Property Type Focus:

  • Residential

RiverRock MIC focuses only on residential mortgages in Ontario, mainly as an alternative lender to newcomers to Canada, those with a bad credit score, and self-employed borrowers. All RiverRock mortgages have a term length of 1 year, with a maximum LTV of 80%. RiverRock has a higher average LTV in its portfolio than other MICs, with an average LTV of 68%.

For investors, RiverRock requires at least a 1-year hold before you can redeem your shares and withdraw your investment. After the initial 1-year hold, you can redeem class A shares quarterly. While for class A1, F and N, 6 months notice is required. This makes RiverRock less liquid than other open-end MICs, which might only require 30 days to redeem. RiverRock also requires a minimum investment of $150,000 from non-accredited investors or $25,000 from accredited investors.

RiverRock Fast Facts

  • Average Mortgage Size: $422,804
  • Average LTV: 68%
  • Max Mortgage Term: 12 months
  • Province: Ontario (100% of mortgages)

RiverRock Mortgage Types

Mortgage TypeShare (%)
Single-Family Detached65%
Townhouse19%
Semi-Detached8%
Condo8%

RiverRock Mortgages by Area

AreaShare (%)
GTA62%
KW-Cambridge-Guelph-London15%
Greater Hamilton10%
Greater Barrie6%
Greater Niagara5%
Greater Ottawa3%

RiverRock Mortgage Maturities (Remaining)

AreaShare (%)
3 Months21%
6 Months27%
9 Months26%
12 Months26%

RiverRock Data Source: Investor Fact Sheet and RiverRock

CMI MIC Investment Summary

Annual Dividend Yield
6% - 11%
Annual Fee
1%
Average LTV
68%
cmi logo

CMI MIC

Minimum Investment: $5,000

Annual Management Fee: 1%

Exempt Market Dealer: Corton Capital

Lending Focus: Urban

Property Type Focus:

  • Residential

Canadian Mortgages Inc. (CMI) offers three different MIC portfolios based on risk level. In all cases, CMI invests in urban residential properties within Ontario, British Columbia, Alberta, Nova Scotia, and Newfoundland & Labrador. CMI is a private MIC, and requires a minimum investment of $5,000. They charge an annual management fee of 1% across all of its portfolios. They also charge a 20% performance fee, which is 20% of the return over a specified target each year.

CMI's Prime Mortgage Fund is for conservative investors that want to minimize volatility. CMI does this by limiting mortgage LTVs to 65% and investing in first mortgages. This fund has a lower annual return of 6% to 7%.

CMI's Balanced Mortgage Fund invests in a mix of first and second mortgages, with a higher max LTV of 75%. This gives higher returns of 8% to 9% for investors that want a little more risk in return for possibly higher returns.

CMI's High Yield Opportunity Fund is meant for aggressive investors willing to take on risk. It invests in second mortgages, a high LTV cap of 85%, and a target annual return of 10% to 11%.

The CMI MIC Prime Mortgage Fund is the newest, having started in July 2020. All funds allow for quarterly redemptions.

CMI Fast Facts

CMI Prime Mortgage Fund

  • Target Return: 6% - 7%
  • Average LTV: 59.41%
  • Average Mortgage Size: $205,517
  • Average Mortgage Rate: 6.50%
  • Portfolio Size: $3.7 million
  • Mortgage Types: First mortgages

CMI Balanced Mortgage Fund

  • Target Return: 8% - 9%
  • Average LTV: 66.85%
  • Average Mortgage Size: $363,078
  • Average Mortgage Rate: 7.34%
  • Portfolio Size: $122 million
  • Mortgage Types: First and second mortgages

CMI High Yield Opportunity Fund

  • Target Return: 10% - 11%
  • Average LTV: 76.49%
  • Average Mortgage Size: $239,502
  • Average Mortgage Rate: 9.55%
  • Portfolio Size: $40.48 million
  • Mortgage Types: Second mortgages

CMI Mortgages by Province

ProvinceShare (%)
Ontario74.33%
British Columbia18.81%
Alberta4.78%
Quebec0.9%
Manitoba0.9%
New Brunswick0.3%

CMI Data Source: CMI

AP Capital Investment Summary

Annual Dividend Yield
8%
Annual Fee
1.5%
Average LTV
58%
apcap logo

AP Capital MIC

Minimum Investment: $10,000

Annual Management Fee: 1.5%

Exempt Market Dealer: Diversifi Alternative Investments Ltd

Lending Focus: Western Canada

Property Type Focus:

  • Residential

AP Capital MIC focuses on urban markets in Western Canada, mainly British Columbia and Alberta, with mostly residential first mortgages. Specifically, they look for single-family detached homes in Vancouver and the Fraser Valley. The majority of AP Capital's mortgages are for non-owner occupied homes. These might be second homes or investment properties.

AP Capital is a private MIC and requires a $10,000 minimum investment. Redemptions require 60-days notice. AP Capital charges an annual management fee of 1.5%. Due to the nature of BC’s housing market, AP Capital’s average mortgage size is larger than other MICs operating in other provinces.

Most investors with AP Capital have non-registered (cash) accounts, at 70% of investors. 30% of investors have a registered account. AP Capital also offers a dividend reinvestment plan (DRIP), which 44% of investors use. 56% of investors have opted to receive monthly cash distributions instead of automatically re-investing. As of September 2023, 5% of their mortgages were in foreclosure.

AP Capital Fast Facts

  • Average Mortgage Size: $682,441
  • Average Mortgage Rate: 7.70%
  • Average LTV: 58%
  • Max Mortgage Term: 12 months
  • Province: British Columbia (89.4% of mortgages)

AP Capital Mortgage Types

Mortgage TypeShare (%)
Single-Family Detached56%
Other31%
Townhouse3%
Condo4%

AP Capital Mortgages by Province

ProvinceShare (%)
British Columbia93%
Alberta7%

AP Capital Data Source: Offering Memorandum and Fact Sheet

Timbercreek Financial Investment Summary

Annual Dividend Yield
10.7%
1-Year Stock Return
-8.9%
Average LTV
67%
timber logo

Timbercreek Financial

Minimum Investment: 1 share

Stock Symbol: TF

Annual Management Fee: 0.85%

Lending Focus: Across Canada

Property Type Focus:

  • Multi-Residential
  • Commercial

Timbercreek Financial is a publicly-traded private lender with a strong focus on income-producing properties, such as multi-residential and commercial properties. This is reflected in its average mortgage size of $10.5 million. Timbercreek is a large corporation with $3 billion in assets under management. In addition to being an MIC focused on urban,, income-producing properties, Timbercreek Capital originates mortgages in the United States, Ireland, and the United Kingdom as well.

The average mortgage rate in Timbercreek's portfolio is 7%, with 87% of Timbercreek's mortgages having a floating (variable) interest rate. Timbercreek says that they invest in commercial mortgages to enhance their portfolio yield. This is seen with 89.3% of their mortgages being to income-producing properties, with 64.9% being multi-residential properties.

Timbercreek Financial Fast Facts

  • Average Mortgage Size: $10.5 million
  • Average LTV: 67%
  • Mortgage Portfolio: $1.1 billion

Timbercreek Financial Data Source: Financial Report and Fact Sheet

Best 5-Year Fixed Mortgage Rates in Canada CanadaLeaf
Select: Term
Fixed
Variable

About MICs in Canada

MIC Rules

MICs are defined in section 130.1 of the Income Tax Act, and they must follow these rules:

  • Be a Canadian corporation
  • Only lends funds, and not use funds to manage or develop real estate
  • Cannot invest in property outside of Canada or in shares of non-Canadian corporations
  • There must be at least 20 shareholders, with no shareholder allowed to own more than 25% of all issued shares
  • At least 50% of the MIC must be invested in debts secured by residential "houses" (as defined in the National Housing Act) or in housing projects.
  • At most 25% of the MIC can be invested in property, excluding property acquired by foreclosure or mortgage default

How do I invest in MICs?

As a corporation, MICs can either be private or public. Public MICs are listed on a stock exchange, and their shares can be bought or sold by anyone. You can invest in public MICs by buying as little as one share through a stock brokerage or trading platform.

Investing in private, non-publicly traded MICs is harder, as they are less liquid. Often, you can only access them through a financial advisor. Depending on your province of residence, you may have to be considered an “eligible investor” or an “accredited investor” in order to invest in the MIC. There might also be minimum investment amounts, such as $5,000 or $10,000. Some private MICs might accept payment through bank draft, wire transfer, electronic funds transfer (EFT), or by certified cheque.

Tax Benefits of a MIC

One of the main benefits of a MIC, besides being able to invest in a diversified portfolio of mortgages, is the tax benefits that it offers over other investments. That’s because MICs are flow-through entities. What this means is that instead of the corporation paying tax, the investor (shareholder) pays income tax as if they earned them directly themselves. That’s because dividends paid out by MICs are treated as interest income for shareholders, which is taxed as ordinary income.

This means that the taxes will be lower than with other investments since there’s only one layer of taxation instead of two. Since only the investor pays tax, this avoids the double taxation that is common with other investments.

To see how this works, let’s look at a regular corporation. Any profits that it generates get taxed at the corporate level and then again when dividends are paid out to shareholders. For example, a bank has a portfolio of mortgages that it earns interest from. The bank’s interest income is taxed at the bank’s corporate tax level. When the bank pays out dividends to its shareholders, the shareholders then have to pay tax on their dividends.

With a MIC, however, the MIC does not pay any tax on its interest income. It pays out the full amount of its net income to shareholders, who then pay tax on their dividends as interest income.

Do I avoid income tax with MICs?

MICs do not allow you to avoid paying income tax on your investment earnings, such as interest income or dividends. You still have to pay tax on your investment income. Instead, it allows for double taxation to be avoided.

Registered Accounts and MICs

MICs can be held in registered accounts, such as RRSPs, TFSAs, and RESPs. Since these accounts can defer tax (or avoid tax completely in the case of TFSAs), this means that you might even be able to receive mortgage interest income without paying any tax at all, both at the corporate level and investor level. This can give you greater returns than investing in mortgages with a non-MIC.

Exempt Market Dealers

Private MICs, which are not listed or traded on a stock exchange, rely on Exempt Market Dealers (EMDs) to sell shares of the MIC to investors. If you’re looking to invest in a private MIC, you will have to deal with the MIC’s dealer. This can include them screening you to see if you qualify as an accredited investor or not.

Accredited Investors

Some private MICs might limit who can invest, or how much they can invest, based on their status. The most common way to be considered an accredited investor is to have one of the following:

  • Net income of at least $200,000 for the previous two calendar years
  • Net income of at least $300,000, when combined with a spouse, for the previous two calendar years
  • Net financial assets of over $1 million
  • Net assets of over $5 million

For example, Cannect allows accredited investors to invest any amount that they wish. On the other hand, they limit investments from eligible investors to a maximum of $30,000, while non-accredited investors can only invest $10,000 with Cannect.

Other MICs might even have higher investment requirements from non-accredited investors, such as RiverRock MIC, which has a $25,000 minimum from accredited investors and a $150,000 minimum from non-accredited investors.

When you look to invest in a private MIC, their exempt market dealer will ask a series of questions to determine your status.

The calculators and content on this page are provided for general information purposes only. WOWA does not guarantee the accuracy of information shown and is not responsible for any consequences of the use of the calculator.