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What Is A Mortgage Investment Corporation?

A mortgage investment corporation takes property as security in order to lend money while charging an interest rate.

Understanding How Mortgage Investment Corporations Work For And Benefit You

A Mortgage Investment Corporation (MIC) is a company that specializes in mortgage lending in Canada. These companies take property as security to lend money and charge an interest rate. They allow shareholders to take part in a non-taxed flow investment which comes from the redistribution of generated revenue to investors. It is also important to know that shares of a mortgage investment corporation are investments as defined by the Canadian Income Tax Act.

Defining MICs

According to subsection 130.1 of the Income Tax Act, a corporation is considered a mortgage investment corporation if it meets the following conditions for a full year:

  • The corporation must be Canadian
  • The corporation’s only undertaking is the investment of funds of the corporation and it does not manage or develop any real or immovable property
  • The corporation is not consisted of i) debts owing to the corporation that are secured on real or immovable property situated outside Canada; ii) debts owning to the corporation by non-resident persons unless these debts are secured on real or immovable property located in Canada; iii) shares of the capital stock of corporations not resident in Canada or iv) real or immovable property situated outside Canada
  • The corporation mush have 20 or more shareholders

How It Works

Mortgage investment corporations are governed provincially through strict audit and reporting rules. For instance, at the end of every fiscal year, audit results are made available for all shareholders. In this regard, it is best to invest in an MIC when statements become available each year. Mortgage investment corporations are widely considered to be a more transparent and safe opportunity for investing in mortgages and real estate. Most importantly, they are not taxed as a corporation.

Growth In Investments

Since 1995, Canada has seen a proliferation of mortgage investment corporations. Some are small with only 20 shareholders while others are larger with thousands of shareholders throughout the country. Practically, a mortgage investment corporation manages a portfolio of secure mortgages where individual investors pool their finances to create mortgage loans. Also, each mortgage investment corporation has its own investment strategy.

Although mortgage investment corporations promise a lower risk and higher returns, it is also important to be well informed before you decide to invest; relying on a trusted corporation, such as NLMIC, with a proven track record is an excellent way to reduce risk. Although the law limits mortgage investment corporations to properties, the scope of what constitutes a residential mortgage is broad.