What a MIC actually is
A Mortgage Investment Corporation (MIC) is a special Canadian corporate structure created under Section 130.1 of the Income Tax Act. It pools investor capital and lends that capital out as residential and commercial mortgages — typically the kind of deals that don't fit at the big banks: short-term bridges, second mortgages, construction draws, alternative-income borrowers, recently divorced refinancers, newcomers without two years of T4s.
The MIC charges borrowers an interest rate that's higher than what a Schedule I bank charges. After paying the fund's operating costs, the remaining net income is distributed to investors as dividends. Because of the Section 130.1 designation, the MIC itself pays no corporate tax on income it distributes — meaning your returns aren't double-taxed.
The trade-off is structural: in exchange for the tax pass-through, a MIC must keep at least 50% of its assets in residential mortgages and cash, hold no more than 25% of assets in real estate, and have 20+ shareholders with no single investor holding more than 25%.
How MIC returns actually work
A MIC's gross return is the weighted average yield on its loan book. If the fund's loan tape averages a 9.5% lending rate, the gross return before costs is 9.5%.
From that gross yield, the MIC subtracts:
- Management fee — typically 1.0%–2.0% of AUM, paid to the fund manager
- Operating expenses — audit, legal, custodian, tax filings, technology
- Loan loss provisions — money set aside for arrears, charge-offs, foreclosure costs
- Performance fee or carried interest — sometimes, above a hurdle rate
What's left is the net distributable yield — the number you actually receive as an investor.
Typical Canadian MIC math
A representative residential MIC might run something like:
- Gross weighted-average lending yield: 9.8%
- Management fee: −1.5%
- Operating + loan loss reserve: −0.8%
- Net distributable yield: ~7.5%
That 7.5% gets distributed pro-rata to shareholders each month or quarter. On a $100,000 investment, that's $7,500/year — usually deposited as cash, or reinvested as additional units if the MIC offers a DRIP (Distribution Reinvestment Plan).
How MIC dividends are taxed
This is where investors most often slip up. MIC dividends are NOT taxed like the dividends you get from a Canadian public company. They're taxed as interest income — meaning at your full marginal rate.
For a high-income investor in Ontario taxed at the top combined rate (~53.5%), a 7.5% MIC distribution outside a registered account effectively becomes a ~3.5% after-tax return.
How to hold a MIC
- Inside a TFSA — distributions grow tax-free forever. The single best home for MIC units.
- Inside an RRSP / RRIF — distributions grow tax-deferred. Tax is paid only on withdrawal.
- Inside a corporate account — taxed as passive investment income, with high integrated rates.
- Personally, in a non-registered account — taxed at your marginal rate. Usually the worst spot.
If you're considering a MIC and you have unused TFSA contribution room, use that room first. The TFSA's tax-free compounding is exactly the structure that captures the full benefit of monthly distributions.
Who MICs are for
MICs are not a "first investment" vehicle. They suit investors who:
- Already have a diversified portfolio of public-market equities and fixed income
- Want monthly cash flow rather than capital appreciation
- Are accredited or eligible to invest under an exempt-market prospectus exemption
- Can lock up capital for 6-12 months at a minimum
- Are comfortable with private-market illiquidity and the absence of daily mark-to-market
The classic investor is a retiree drawing income, a corporate-account holder building yield, or a high-net-worth investor allocating a small slice (5%-15% of portfolio) to private credit.
Who MICs are NOT for
If you might need the money in less than 12 months, skip MICs. If you're at the start of your investing journey and don't have an emergency fund or maxed-out registered accounts, also skip — public market index funds are the better foundation.
The five risks investors most often miss
1. Concentration risk
A MIC that lends only in one province, only on one type of property, or only to one borrower demographic is exposed to that market. Toronto-only construction MICs got hammered in 2018 when CMHC tightened insurance rules. BC residential MICs got hammered in 2022 when interest rates spiked.
Ask the fund manager for a geographic concentration breakdown and a loan-purpose mix. A well-diversified MIC should have meaningful exposure across multiple provinces and across purchase, refinance, bridge, and construction loans.
2. Liquidity risk
Most MICs have a redemption window — quarterly, sometimes monthly — and a lockup period of 6-12 months from your initial investment. Some impose a redemption fee for the first 1-3 years.
In a stress event (2008, March 2020, 2022 rate spike), funds can suspend redemptions entirely while they manage the underlying loan book. This is a feature, not a bug — it protects remaining unitholders from being forced to sell loans at fire-sale prices. But it means your "monthly income investment" can become temporarily illiquid at exactly the moment you might want to redeem.
3. Underwriting discipline
The single biggest determinant of long-term MIC returns is the quality of underwriting. A MIC that lends at 9% on second mortgages with 80% LTV will produce great returns in a strong market and catastrophic losses in a weak one. A MIC that lends at 7.5% on first mortgages with 70% LTV will produce modest returns through any cycle.
Ask the manager:
- What's the weighted average loan-to-value (LTV) across the entire book?
- What's the maximum LTV the fund will write?
- What share of loans are first mortgages vs second mortgages?
- What's the debt-service coverage approach on commercial loans?
4. Manager and operational quality
A MIC is only as good as the people running it. Three signals to watch:
- Co-investment — does the manager have personal capital in the fund? Aim for 5%+ of fund equity.
- Audit cadence — annual audit by a recognized accounting firm; semi-annual financial reports.
- Loan tape transparency — can you see every loan in the book, with address, LTV, and status? The best managers share full loan tapes with accredited investors.
5. Reporting and accounting integrity
How does the MIC report its arrears rate? Some report only "90+ days past due" — others lump everything beyond 30 days. How are non-performing loans valued? Some fund managers carry impaired loans at face value, masking real losses.
A well-run MIC publishes monthly or quarterly statements with:
- Unit price (NAV per unit)
- Distribution amount and yield
- 30-, 60-, 90-day arrears rates
- Top-10 loan concentrations
- Any loans in foreclosure or power-of-sale proceedings
The questions you should actually ask before investing
Before you commit a dollar, get written answers to these:
- What's the funded-loan-to-deposit ratio? (How much investor capital is parked as cash vs deployed in mortgages? Idle cash drags returns.)
- What's the weighted average LTV across the book? (Lower is safer; under 70% is conservative; over 80% is aggressive.)
- What's the 90+ day arrears rate and trailing 12-month loan losses? (Compare against the fund's loan loss provisions — are reserves adequate?)
- How is the fund audited, by whom, and when was the last audit completed?
- What's the redemption history — has the fund ever suspended or gated redemptions?
- What's the structure for distributions? Pro-rata across one class, or are there preferred/common share classes?
- What share of loans are in second-position or third-position security?
- What's the manager's track record across multiple cycles — did they manage capital through 2008 and 2022?
If the fund manager hesitates, deflects, or sends you back to the offering memorandum without a direct answer, that's a signal.
How MICs compare to other private credit alternatives
For Canadian investors looking for yield outside the public markets, MICs sit alongside:
- Direct private mortgage investing — higher control, much higher operational burden, no diversification
- REITs (Real Estate Investment Trusts) — daily liquidity, broader real-estate exposure, lower yield, capital-appreciation potential
- Bond funds / GICs — lower yield, daily or quarterly liquidity, government or investment-grade credit risk
- Syndicated mortgage investments — single-loan exposure (illegal in some provinces as marketed)
- Private equity / venture capital — much longer lockups, capital-appreciation focus, no income
A balanced approach holds a small MIC allocation (5%-15%) as a yield-enhancing complement to public-market core holdings — not as the core itself.
If a financial advisor is recommending that you put 50%+ of your investable assets into a single MIC, get a second opinion before signing anything.
Common questions
Are MIC investments insured by CDIC?
No. MICs are not deposit-taking institutions. Your capital is invested in private mortgages, which carry borrower credit risk. CDIC covers eligible deposits at member banks and trust companies — not investment funds.
Can I lose my principal in a MIC?
Yes. While well-managed MICs have steady track records, you can lose principal if the manager makes bad loans, if a major borrower defaults catastrophically, or if a market downturn destroys collateral value across the book.
What's the minimum investment?
Typically $25,000 to $100,000 for accredited-investor MICs. Some prospectus-offered MICs accept smaller amounts ($5,000-$10,000) through registered exempt-market dealers.
How do I get started?
Most MICs distribute through registered exempt-market dealers (EMDs) or investment counsellors. You'll need to complete an accredited-investor questionnaire or use a prospectus exemption. Read the offering memorandum carefully — it's a legal document with material disclosures.
Where does Mortgage360 fit?
Many Canadian MIC fund managers run their entire operation on Mortgage360 — from borrower origination through loan servicing to investor cap-table and monthly distributions. If you invest in a Mortgage360-powered MIC, your investor portal gives you live holdings, IRR/TVPI/DPI metrics, full statement history, T5s the morning of Jan 1, and a watermarked data room for offering memoranda and audited financials.
Bottom line
A MIC can be a good source of monthly tax-deferred income inside a registered account, allocated as a 5%-15% slice of a broader portfolio. The fund manager's discipline matters more than the headline yield. Demand transparency, hold inside a TFSA or RRSP where possible, and don't go in expecting daily liquidity.
For more on the structure of private lending: see our explainer on private lending in Canada and how investor portals make MIC reporting auditor-grade.