Mortgage Investing FAQ: 60 Questions Canadian Investors Ask

Mortgage investing means lending money that is secured by real property, either directly on a specific mortgage or through a pooled vehicle such as a mortgage investment corporation (MIC) or a mortgage fund. The investor earns interest, and sometimes a share of lender fees, in return for the risk that a borrower does not repay and the property sells for less than the debt. Mortgage investments are not guaranteed, and principal can be lost.

A borrower who falls outside a bank's criteria, or needs money faster than a bank can provide it, borrows from a private lender, usually through a licensed mortgage broker. The lender's money comes from investors, directly or through a pool such as a MIC, and the loan is registered against the property as security. The borrower pays interest during the term and repays the principal at maturity, on refinancing or on sale.

Mostly from the interest borrowers pay, plus any lender fees charged when a loan is funded or renewed. In a pooled vehicle such as a MIC, the investor receives what is left after management fees, operating costs and any loan losses. Returns are targets, not promises, and they fall when borrowers default.

A first mortgage is repaid first from the proceeds if the property is sold; a second mortgage is repaid only after the costs of sale and the first mortgage have been paid in full. Second mortgages usually carry higher rates because a fall in value reaches them first. Higher return comes with higher risk, and a second-mortgage investor can lose principal even when the first lender is repaid in full.

Loan-to-value (LTV) is the loan divided by the property's appraised value; for a second mortgage, the combined LTV includes the first mortgage as well. The gap between debt and value is the cushion that absorbs a price decline, enforcement costs and unpaid interest before the investor's principal is affected. An LTV is only as reliable as the appraisal behind it.

A lender fee is a one-time charge paid by the borrower to the lender when a private mortgage is funded or renewed, often deducted from the loan advance. It forms part of the lender's income alongside interest. In a MIC, lender fees flow into the portfolio's revenue, and the offering memorandum and financial statements show how they are treated.

Yes. Residential mortgages are secured on homes, such as houses and small buildings of up to four units, whose value depends mainly on the housing market; commercial mortgages are secured on business or income-producing property, whose value depends heavily on rents, tenants and use. Commercial loans tend to be larger and more complex to appraise and enforce, so the two carry different risks.

Yes. Through a licensed mortgage brokerage, an investor can fund a single mortgage or take a fractional share of one, holding an interest in a specific registered charge on a specific property. That gives control over each loan but concentrates risk in one borrower and one property, and the money usually comes back only when the loan matures or is repaid. Syndicated mortgage interests are also subject to securities rules.

A mortgage investment corporation (MIC) is a Canadian corporation whose only undertaking is investing its funds, mainly in mortgages, and which meets the conditions in subsection 130.1(6) of the Income Tax Act. A MIC distributes its taxable income to shareholders instead of paying corporate tax on it, so the income is taxed once, in the shareholders' hands. Investors own shares in the MIC, not the mortgages themselves.

Investors buy shares, and the MIC lends the pooled money as mortgages, usually arranged through licensed mortgage brokers and serviced by a mortgage administrator. Interest and fees collected from borrowers, less the MIC's costs and any loan losses, are paid to shareholders as dividends, taken in cash or reinvested. The board and manager choose the loans, set lending limits and decide redemptions under the articles and offering memorandum.

An ordinary corporation pays tax on its income, and its shareholders are taxed again on dividends, with a dividend tax credit offsetting part of that. A MIC that meets section 130.1 of the Income Tax Act and distributes its taxable income does not pay corporate tax on that income; instead the dividends are taxed in the shareholder's hands as interest. To keep that treatment it must meet the section's conditions throughout every taxation year.

Subsection 130.1(6) of the Income Tax Act sets nine conditions that must be met throughout the year. They include being a Canadian corporation whose only undertaking is investing its funds; having at least 20 shareholders, none of whom, with related persons, holds more than 25% of any class; holding at least 50% of the cost amount of its property in residential mortgages, insured deposits and money; and staying within limits on directly held real property and on borrowing. A corporation that fails a condition is not a MIC for that year.

MIC is a tax term: a mortgage investment corporation is a corporation that meets section 130.1 of the Income Tax Act. Mortgage investment entity (MIE) is a broader term often used by regulators and housing agencies for pooled private mortgage lenders, covering MICs as well as mortgage funds, trusts and similar vehicles. Data published about MIEs therefore covers more than MICs alone.

A MIC lends money secured by property and earns interest, so its investors hold a debt-based income stream; a real estate investment trust (REIT) owns property and earns rent and changes in property value, so its investors hold real estate equity. A MIC's income is limited mainly to the interest and fees it charges, while a REIT's value can rise or fall with property prices. Their tax treatment and risks differ as well.

The MIC's manager or board selects and approves loans under its lending policies, and a mortgage administrator collects payments, holds them in trust, follows up arrears and manages enforcement. In Ontario mortgage administration is a licensed activity under FSRA, and in British Columbia the Mortgage Services Act is scheduled to make it a licensed activity from 13 October 2026. The offering memorandum names who does what and how they are paid.

A MIC's income comes from the interest borrowers pay and the lender fees charged on funding and renewal. From that it pays management fees, administration and other operating costs, and absorbs any loan losses; what remains is distributed to shareholders. Mortgage investments are not guaranteed, and a rise in defaults reduces distributions and can reduce the value of the shares.

No. MIC shares are not guaranteed by the MIC, its manager or any government agency, and they are not deposits, so CDIC deposit insurance does not apply. Returns are targets, not promises, and principal can be lost. The real property behind a MIC's loans reduces the risk of loss but does not remove it.

Gross yield is what the mortgages earn before costs; net yield is what is left for investors after management fees, operating costs and loan losses; after-tax yield is what an investor keeps after personal income tax. Because MIC dividends are taxed as interest, after-tax yield in a non-registered account can sit well below the distribution rate: an illustrative 8% distribution taxed at an assumed 40% marginal rate leaves 4.8%. Comparing products on the same basis keeps the comparison fair.

It depends on the MIC: some pay monthly and others quarterly, as set out in the offering memorandum. Lendmax Capital MIC, for example, pays distributions quarterly, in cash or reinvested. Distributions are not guaranteed and may be reduced or suspended.

A dividend reinvestment plan (DRIP) uses an investor's distributions to buy more MIC shares instead of paying cash, so income compounds over time. Reinvested dividends are still taxable in the year they are paid when the shares are held outside a registered plan. A DRIP also adds to an illiquid holding, which matters if the investor later needs to redeem.

In mortgage lending a higher rate usually reflects a riskier loan: a second position, a higher loan-to-value, a weaker borrower, a harder-to-sell property or a construction or development project. A MIC targeting a higher yield is therefore usually taking more of those risks, or using more borrowed money. Higher return comes with higher risk, and a target is not a promise.

Lendmax Capital MIC publishes its net rate of return paid to investors by fiscal year: 0.00% in FY2020, 6.00% in FY2021, 7.83% in FY2022, 8.15% in FY2023, 10.15% in FY2024 and 13.57% in FY2025, according to its past-performance page updated 19 September 2026. The range shows how much distributions can vary from one year to the next. Past performance does not indicate future results. Distributions are not guaranteed and may be reduced or suspended.

Yes. A MIC can only distribute what its portfolio earns, so rising arrears, loan losses or uninvested cash reduce distributions, and the board can reduce or suspend them. The offering memorandum explains the distribution policy and the board's discretion. Investors relying on the income for living costs might consider how they would manage a reduced or missed payment.

Under subsection 130.1(2) of the Income Tax Act, a taxable dividend from a MIC, other than a capital gains dividend, is treated in the shareholder's hands as interest. It is taxed at the investor's marginal rate, with no dividend gross-up or dividend tax credit, and reported on a T5 slip. This is as at October 2026; a Canadian tax professional can confirm how it applies to a particular investor.

Generally yes. MIC shares are generally a qualified investment for registered plans, including RRSPs, RRIFs, TFSAs, RESPs, RDSPs and FHSAs, held through a self-directed plan whose trustee accepts them. Income inside the plan is sheltered or deferred under that plan's rules, but the prohibited-investment rules can still apply, so check them first; this is as at October 2026.

Under the prohibited-investment rules in section 207.01 of the Income Tax Act, MIC shares can become a prohibited investment if the plan holder, together with non-arm's-length persons, has a significant interest, generally 10% or more of any class of the MIC's shares. They can also become one if the MIC holds debt of the plan holder or of persons not dealing at arm's length with them. Special taxes can apply, so confirm the position with a Canadian tax professional and the CRA's Income Tax Folio S3-F10-C2, as at October 2026.

A RRIF requires minimum withdrawals every year, while MIC shares have no secondary market and redemptions can be deferred or suspended by the board. If most of a RRIF is in MIC shares, meeting the minimum may depend on the MIC's distributions or redemptions. Investors might keep enough liquid assets in the plan, or ask the trustee what options exist, as at October 2026.

Generally a corporation can subscribe for MIC shares in the same way as an individual, subject to the offering's eligibility rules. The dividends are still treated as interest, and investment income inside a private corporation is taxed differently from personal income, so the after-tax result can change considerably. This is as at October 2026; a Canadian tax professional can model it for a particular corporation.

MIC dividends treated as interest are reported on a T5 slip for the calendar year in which they are paid, including dividends that were reinvested. Shares held in a registered plan are reported through the plan, not on a personal T5. This is as at October 2026; a Canadian tax professional can confirm the reporting for a particular account.

Not in the way an insured deposit is: borrowers default, property values fall, enforcement takes time and money, and principal can be lost. The security of real property and a conservative loan-to-value reduce those risks without removing them. How much risk a particular investment carries depends on its borrower, property, loan-to-value, position, term, jurisdiction and structure.

Yes. If a borrower defaults and the property sells for less than the debt plus the costs of enforcement, the lender bears the shortfall, and a second-mortgage lender bears it before the first. In a MIC, losses reduce distributions and can reduce the value of the shares. Mortgage investments are not guaranteed, and principal can be lost.

No. Neither a direct mortgage nor a MIC share carries a principal guarantee, and neither is covered by CDIC deposit insurance. The property securing the loan is the main protection, and it protects principal only to the extent that it sells for more than the debt and costs ranking ahead of the investor.

A MIC spreads money across many mortgages secured by real property, which reduces the impact of any single default, but the investment can still lose value. Defaults, falling property values, concentration in one region and the manager's own decisions all affect the outcome, and the shares cannot be sold on a market. The audited financial statements and offering memorandum show how a particular MIC manages those risks.

It is possible, although a total loss usually requires several things to go wrong at once. A second mortgage on a property that falls sharply in value can be wiped out after the first mortgage and enforcement costs are paid, and a MIC that suffers widespread losses, fraud or mismanagement can lose most or all of its capital. Position, loan-to-value and diversification determine how exposed an investor is.

The main risks are credit risk (borrowers defaulting), property risk (values falling or properties proving hard to sell), concentration risk (too much in one region, borrower or position), liquidity risk (redemptions deferred or suspended) and manager risk (weak underwriting, conflicts or fraud). Borrowing by the MIC, interest-rate changes and regulatory change add to these. The risk factors in each MIC's offering memorandum list them for that MIC.

Private mortgages are usually made to borrowers or on properties outside bank criteria, at higher rates and for short terms, which is the source of both the higher yield and the higher risk. A direct private investor also takes on single-loan concentration, depends on the broker's and administrator's diligence, and bears enforcement costs if the borrower defaults. Higher return comes with higher risk, and principal can be lost.

The lender or administrator first contacts the borrower to cure the arrears or agree a plan. If that fails, the lender enforces under the law of the province where the property is: power of sale in Ontario, judicial foreclosure in British Columbia, court-supervised sale in Alberta and hypothecary recourses in Quebec, among others. Enforcement takes time and costs money, and interest earned during that period may not be collected until the property is sold.

No. CDIC insures eligible deposits at member institutions up to $100,000 per insured category, and MIC shares and mortgage investments are not deposits. No provincial deposit insurer covers them either. An investor comparing a MIC with a GIC is comparing an uninsured investment with an insured deposit.

The mortgage is registered on the property's title, giving the lender a claim against the property if the borrower defaults, ranked by priority against other registered charges. If the debt is not paid, the lender can enforce and be repaid from the sale proceeds ahead of the borrower and of later-ranking lenders. The security protects principal only to the extent the property's net sale value exceeds the debts ranking ahead of the investor.

By asking the MIC to redeem the shares under its articles and offering memorandum, usually with a notice period; some MICs also charge a fee for redemption within a set holding period. The board can defer or suspend redemptions, for example when cash is tied up in loans or many requests arrive at once. There is no secondary market, so redemption is usually the only exit.

Yes, within the limits its articles and offering memorandum set. A board can defer or suspend redemptions to protect remaining shareholders when cash is short, which is often when investors most want their money back. Investors who may need the capital at short notice might consider how they would cope with a delay.

Generally no. Private MIC shares sold under prospectus exemptions are not listed on an exchange and usually carry resale restrictions, so the main way out is redemption by the MIC. A few MICs are publicly listed, and their shares trade at market prices that can differ from the value of the underlying portfolio.

At maturity the borrower repays the loan, usually by refinancing or selling, or the lender agrees to renew it on new terms. If the borrower cannot repay and no renewal is agreed, the loan is in default even if every payment was made on time. For a MIC, repaid loans return cash that is re-lent or used to meet redemptions.

Reinvestment risk is the chance that money returned early, through a repayment or a maturity, can only be re-lent at a lower rate or sits uninvested for a time. Short private-mortgage terms mean money comes back often, so a MIC's yield can drift with market rates and with how quickly it finds new loans. Cash waiting to be lent earns little and dilutes distributions.

Not necessarily. In a MIC the loans may be short, but an investor's own exit depends on the redemption terms, notice period and the board's discretion, not on when individual loans mature. In a direct mortgage the money returns when that loan is repaid, which can be well after the maturity date if the borrower defaults.

That depends on the prospectus exemption the MIC uses and the investor's province. MIC shares are usually sold under the offering memorandum exemption, which caps individual investment in six provinces, or the accredited investor exemption, which requires set income or asset thresholds. A registered dealer must also assess whether the investment is suitable for the individual.

In summary, an individual accredited investor has financial assets above $1,000,000 net of related liabilities (alone or with a spouse), net income before tax above $200,000 (or $300,000 with a spouse) in each of the last two years with the same expected this year, or net assets of at least $5,000,000. Accredited investors can use the accredited investor exemption and have no offering memorandum investment limit. Thresholds summarised; confirm current definitions with a registered dealer.

In summary, an individual eligible investor has net assets above $400,000 (alone or with a spouse), or net income before tax above $75,000 (or $125,000 with a spouse) in each of the last two years with the same expected this year, or is advised by an eligibility adviser where the rules allow. Eligible status raises the offering memorandum investment limit in the six provinces that have one. Thresholds summarised; confirm current definitions with a registered dealer.

In Alberta, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan, an individual can invest up to $10,000 in 12 months if not an eligible investor, up to $30,000 if eligible, and up to $100,000 if eligible and advised on suitability by a portfolio manager, investment dealer or exempt market dealer. Accredited investors have no limit. Other provinces differ, so confirm with a registered dealer.

An exempt market dealer (EMD) is a securities dealer registered to sell securities distributed under prospectus exemptions, such as MIC shares. It must collect know-your-client information and assess whether an investment is suitable for the client before accepting a subscription. Its registration can be checked on the CSA National Registration Search.

An offering memorandum (OM) is the disclosure document a MIC gives investors when selling shares under the offering memorandum exemption. It describes the business, lending policies, fees, risk factors, redemption terms and the rights of each share class, and includes audited financial statements. It is the main due diligence document, and where the exemption requires one, investors also sign a risk acknowledgement form.

Start with the seven axes: who the borrowers are, what the properties are, the loan-to-value and how values were set, the security position, the term, the jurisdiction and the investment structure. Then ask about fees, arrears and losses in the audited financial statements, redemption terms, who administers the loans and whether they are licensed, and whether the dealer is registered. The due diligence checklist on this site names the document that answers each question.

For securities dealers, the CSA National Registration Search shows registration category and any disciplinary history. Mortgage brokerages, brokers and, in some provinces, administrators are licensed provincially, for example by FSRA in Ontario, BCFSA in British Columbia and RECA in Alberta. Regulators repeatedly advise investors to check both before investing.

Each MIC sets its own minimum subscription in its offering memorandum. Separately, the offering memorandum exemption caps how much some individuals can invest in a 12-month period. Investors might consider how much of their portfolio they are comfortable holding in an illiquid investment before choosing an amount.

There is no single national regulator. Mortgage brokering, and in some provinces mortgage administration, is regulated provincially, while the sale of MIC shares and other mortgage securities is regulated by provincial securities commissions that coordinate through the Canadian Securities Administrators. MIC tax status is federal, under section 130.1 of the Income Tax Act. This summary is current as of October 2026.

British Columbia's Mortgage Services Act, which received Royal Assent on 3 November 2022, is scheduled to come into force on 13 October 2026. It repeals and replaces the Mortgage Brokers Act and makes mortgage lending and mortgage administration licensed activities, overseen by BCFSA. BCFSA publishes the licensing categories; this answer is current as of October 2026.

Ontario, New Brunswick, Newfoundland and Labrador and Prince Edward Island use power of sale; British Columbia, Alberta, Saskatchewan and Nova Scotia use judicial processes; Quebec uses hypothecary recourses under its Civil Code; and Manitoba uses an administrative process through the Land Titles Office leading to an order for sale. The route affects how long recovery takes and what it costs. The law of the province where the property is located applies, not the investor's.

Amendments coordinated by the Canadian Securities Administrators came into force on 1 March 2021, and on 1 July 2021 in Ontario and Quebec. They withdrew the private issuer and 'mortgages' prospectus exemptions for syndicated mortgages and added appraisal requirements for offering memorandum distributions. In Ontario, oversight of syndicated mortgages has since been split between FSRA and the OSC; check the local securities regulator for how the rules apply in other provinces.

The Autorité des marchés financiers (AMF) has regulated mortgage brokerage in Quebec since 1 May 2020, and it is also Quebec's securities regulator. Quebec's civil law uses the hypothec rather than the common-law mortgage, and enforcement uses hypothecary recourses. This is current as of October 2026.

No. A MIC does not take deposits, its shares are not CDIC-insured, and it is not supervised as a bank. Its oversight comes from securities regulators for the sale of its shares, provincial mortgage regulators for brokering and, where applicable, administration, and the Income Tax Act for its tax status. Investors therefore rely heavily on disclosure, the annual audit and their own due diligence.