Investing in MIC's

A Mortgage Investment Corporation (MIC) is a special designated investment vehicle by Revenue Canada which allows the corporation to payout all of its net yearly revenue as dividends without accruing income tax. The tax burden is passed on to its shareholders who are typically investors such as yourself. The main reason for investing in a MIC is that it is suitable for investors who have a limited amount of funds to invest and who do not have the time or interest in assuming the administrative responsibilities attached to running a mortgage portfolio.

Due to the feature of suitability for smaller investments it makes it an attractive investment for RRSP’s and RRIF’s.

All of the investments must be in Canadian property and there must be a minimum of 20 shareholders. The administrators must be registered mortgage or real estate brokers who have been in business for at least two years or the person operating a MIC must have a management agreement with such an individual. MIC’s come under the jurisdiction of the Mortgage Brokers Act and regulations administered by the Financial Institutions Commission.

In a nut shell, the MIC investment vehicle is similar to a mutual fund except instead of investing in stocks and bonds it invests in mortgages. Many brokers operate MIC’s as an alternative to their regular mortgage business of placing single investors into single mortgage investments. A MIC investment allows individuals to participate jointly in large pools of mortgages which inherently spreads the risk over a larger number of mortgage investments. Ultimately the equity in the properties we invest in is what allows us to protect our capital and give us the enjoyment of good returns without a lot of risk.