Overview of a MIC




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The experience and industry relationships of the manager is the most important factor in the success of a MIC. The manager’s organization and underwriting skills define the character of the MIC’s portfolio.

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What is a Mortgage Investment Corporation (MIC)?

A Mortgage Investment Corporation or MIC is an investment and lending company designed specifically for mortgage lending in Canada. Governed by Section 130.1 of the Income Tax Act, MICs pay no corporate tax and act as flow-through entities and have to pay out all their taxable income in the form of dividends. For tax purposes, MICs dividends are treated as interest income in the hands of the shareholders.

MIC’s portfolio can include everything from first mortgages on single-family homes to construction loans on commercial development projects. The mortgages are secured on real property, often in conjunction with other forms of security, such as personal and corporate guarantees, general security agreements and assignments of rent, etc. MICs fall under the category of alternative lenders (also called non-bank lenders).

Since shares of a MIC are qualified investments under the Income Tax Act for RDSPs, RRSPs, RRIFs, TFSAs, or RESPs, 100% of an MIC’s income can flow through to registered plans without intermediary tax, and be reinvested, the investor can grow the entire return on a tax-exempt basis until the funds are withdrawn.

Mortgage Investment Corporations were introduced in Canada in 1973 through the Residential Mortgage Financing Act. Owning shares in a mortgage investment corporation enables you to invest in a company which manages a diversified and secured pool of mortgages. MICs provide opportunities for the retail investors to participate in mortgage lending and real estate investments on much the same lines as mutual funds, which enhance their earnings by leveraging their investment in residential mortgages and enjoying the spread between the interest paid on borrowed funds and the interest charged on mortgages. Essentially, the MIC allows the retail investors to share in the benefits of the lucrative and relatively secure mortgage business.