Private credit is increasingly of interest to high-net-worth (“HNW”) investors. As demand for alternative investments grows, Mortgage Investment Corporations, or MICs have become a significant consideration for those seeking to invest in residential mortgages without the challenges associated with direct lending in individual mortgages.
At Union Financial, we see MICs as an income-oriented alternative investment that fits within a diversified financial strategy.
Our MIC, Grow Capital One Inc., is ideal for an investor who wants an investment with diversified security, that produces monthly income, and provides a ‘one-and-done’ approach versus investing in individual loan opportunities.”
— David Hawreluk, LLB, K.C., CEO of Union Financial
Let’s take a closer look at how MICs work, how they differ from direct lending, and whether they might be a fit for your portfolio or planning objectives.
Understanding the Basics of a MIC
How MICs generate income
A MIC is a Canadian investment vehicle that pools capital from investors and lends that capital as private mortgages secured against real property.
MICs earn income primarily from:
- Interest paid by borrowers, and
- Fees such as origination, renewal, and other borrower charges.
MICs commonly focus on short-duration loans with defined credit policies (for example, first or select second position mortgages with stated LTV limits).
Why investors consider MICs
- MICs provide an investment that is secured by a number of mortgages (not just one) and managed by a professional manager.
- MICs diversify across borrowers, properties, and geographic regions, with LTVs typically at 75% and lower.
- MICs operate under board-approved lending policies, credit approval protocols, and independent audit/reporting.
How MICs compare to other private-lending vehicles
While MICs are one way to gain exposure to mortgage lending, they differ from direct one-off or syndicated deals.
| Feature | MIC Fund | Direct Lending |
| Minimum investment | Lower: Private MICs set minimums such as $25k | Typically often much higher: Direct lending typically require investors to invest at least $250K |
| Liquidity | Subject to redemption policy and available cash in the MIC | Liquidity is restricted until deal maturity |
| Underwriting control | Manager sets and applies guidelines | Lenders often have oversight and due diligence responsibilities |
| Diversification | Yes, via a pool of mortgages | Depends on lender’s deal selection and participation in direct lending opportunities |
| Involvement level | Passive | Active |
Evaluating the Risks
Default risk
Real-estate lending carries borrower default risk. MICs mitigate this risk through conservative LTVs and broad diversification across numerous mortgages.
Liquidity constraints
MICs are not bank deposits and redemptions are not guaranteed. Liquidity depends on the redemption policy of the MIC and available cash from repayments, maturities, and new subscriptions.
Market dependence
Real-estate cycles, interest-rate changes, and macro market conditions can affect portfolio performance and distribution levels.
Union Financial’s approach to MICs
Our MIC is designed for investors seeking income from residential mortgage credit with institution-style management and oversight. We integrate lending and portfolio management, apply in-house credit underwriting, and distribute income to investors on a monthly basis.
Who might consider a MIC investment?
A MIC may be suitable if you:
- Are an accredited or eligible investor seeking investment income from real-estate credit;
- Want exposure to a professionally managed pool with clear lending policies;
- Prefer a passive investment approach to mortgage lending;
- Seek diversification beyond public markets; and
- Want a monthly income stream.