What is MIC?
Mortgage Investment Corporations (MIC) were introduced in 1973 by the Government of Canada through the Residential Mortgage Financing Act (RMFA) to make it easier for small investors to participate in the residential mortgage and real estate markets. MICs have their place in the alternative financing ecosystem as proven by their longevity and popularity. They do not fall under the same regulations as banks, and may lend on a property’s value with as many or as few guarantees as the individual MIC manager is prepared to accept on behalf of the investor.
MICs are linked to the Canadian housing market since at least 50 percent of their holdings must be in residential real estate. The recent pace of the Canadian housing market has created a competitive environment
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The MIC’s management is responsible for all aspects of the company’s operations, including the sourcing of suitable mortgage investments, the analysis of mortgage applications, and the negotiation of applicable interest rates, terms and conditions, instruction of solicitors, mortgage portfolio and general administration.
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The Income Tax Act requires that 100% of a MIC’s annual net income, as verified by external audit, be distributed to its shareholders, in the form of a dividend. This dividend is taxed as interest income, in that it primarily represents a flow-through of the interest earned on the Company’s mortgage portfolio.
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Since a MIC pays all of its net profit to its shareholders each year, the MIC itself is not taxed. This is a significant advantage for MIC shareholders, increasing their yield as the two levels of tax applied to regular corporations are avoided.
Like any company, a MIC’s net income is equivalent to its revenues, less its expenses. A MIC’s revenues are comprised of mortgage interest and fee income. Expenses are predominantly comprised of management fees, audit and other professional fees, and loan interest, if the MIC is employing debt in addition to share capital.
Investors' Interest in the MIC Is Well-protected
MICs must comply with CRA regulations when they are set up. Raising money from investors is subject to compliance with securities legislation. The use and return of every investment will be clearly shown in our audited annual financial statements.
All mortgaged property is registered with the Land Title Office in Ontario or the equivalent in other Canadian provinces.
Ontario MI Ltd investments are limited to mortgage investment in Canada. MICs cannot directly engage in real estate development and construction projects.
Who regulates MICs in Canada?
Mortgage Investment Corporations (MIC’s) are regulated by section 130.1 of the Income Tax Act (ITA), which allows investors to pool funds through the purchase of shares for the purpose of investing in mortgages. This entity provides an ideal vehicle for investing in RRSP’s, RRIF’s, LIRA’s, LRIF’s, TFSA, and RESP’s. A MIC is also available to investors as an unregistered investment.
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What is MIC?A mortgage investment corporation or MIC is an investment and lending company designed specifically for mortgage lending (primarily residential mortgage lending) in Canada. Owning shares in a mortgage investment corporation enables you to invest in a company which manages a diversified and secured pool of mortgages.
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Who regulates MICs in Canada?Mortgage Investment Corporations (MIC’s) are regulated by section 130.1 of the Income Tax Act (ITA), which allows investors to pool funds through the purchase of shares for the purpose of investing in mortgages. This entity provides an ideal vehicle for investing in RRSP’s, RRIF’s, LIRA’s, LRIF’s, TFSA, and RESP’s. A MIC is also available to investors as an unregistered investment.
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How is MIC regulated?A MIC (mortgage investment corporation), is a corporate entity with special status from Canada Revenue Agency (CRA). The corporation is a tax-free, flow-through investment vehicle provided that 100% of the annual income is distributed to the shareholders at least annually. The corporation is also required to ensure that a minimum of 50% of its assets are in residential mortgages and all of the assets in the corporation are Canadian. The MIC is however, open to investors outside of the Canadian market.