Short answer
Knowing how to choose a MIC comes down to four things to evaluate before investing: the people and their track record, the loan portfolio and lending policies, the returns, fees and leverage, and the terms for getting money back. The answers are in the offering memorandum, the audited financial statements, the MIC's articles and public regulator registers. A MIC whose answers are clear, in writing and consistent across those documents is easier to evaluate; one whose answers are vague or missing has given an answer of its own.
On this page
Most mortgage investment corporations (MICs) describe themselves in similar terms: secured by real property, monthly or quarterly income, experienced management. The differences that decide how an investment turns out sit underneath — in lending policies, in the actual portfolio, in fees, leverage and redemption terms. Knowing how to choose a MIC is mostly a matter of knowing which questions reveal those differences and where the answers are written down.
This guide sets out twenty questions in four groups. For each group there is a printable checklist naming the document that answers each question, followed by a table describing what a clear answer looks like and what kind of answer warrants caution. It is general education, not investment, tax or legal advice. Mortgage investments are not guaranteed. Returns are targets, not promises, and principal can be lost.
How to choose a MIC using these questions
Ask every question of every MIC under consideration, in writing, and check each answer against the document named. The same twenty questions applied to two MICs make them comparable in a way their marketing does not.
Three documents carry most of the answers. The offering memorandum (OM) describes the business, the people, the lending policies, the fees, the redemption terms and the risk factors. The audited financial statements, and especially their notes, show what actually happened: the portfolio, arrears, losses, borrowing and distributions. The articles of incorporation set the share rights, including redemption. How to read the statements is covered in reading a MIC’s financial statements and offering memorandum; loan-level checks are in the mortgage investor’s due diligence checklist.
Some answers will amount to a refusal to disclose. Part of that is legitimate: a MIC should not publish its borrowers’ names, addresses or personal finances. Portfolio-level information is different. The split by position, property type and province, the largest exposures as percentages, arrears and losses, fees and leverage can all be disclosed without identifying anyone. When a MIC declines to give portfolio-level figures, it is worth recording the refusal alongside the answers from other MICs, because it is part of the comparison.
People, registration and governance
A MIC is a pool of loans chosen by its managers, so the first group of questions is about them: who they are, who oversees them, whether they are properly licensed and registered, and where their interests may differ from the investor’s.
- 1. Is the dealer selling the shares registered, and is the mortgage administrator licensed in each province where the MIC lends? — CSA National Registration Search and provincial registers (FSRA, BCFSA, RECA, AMF)
- 2. Who manages the MIC and sits on its board, and how long have they lent through weaker as well as stronger markets? — OM, management and directors section
- 3. What conflicts of interest exist: loans to related parties, fees paid to affiliates, lender fees kept by the manager? — OM conflicts section and the related-party note in the audited financial statements
- 4. Who audits the financial statements, and is the audit opinion unmodified? — independent auditor’s report in the audited financial statements
- 5. How does the MIC meet and monitor the conditions in subsection 130.1(6) of the Income Tax Act? — OM tax section
What the answers tell you
| Question | A clear answer | An answer that warrants caution |
|---|---|---|
| 1. Registration | Names and registration categories that match the public search | Unregistered seller, or a licence that cannot be found |
| 2. Management | Named people, specific experience, a board with some independence | Vague experience claims, one person controlling every decision |
| 3. Conflicts | Each related-party arrangement disclosed with amounts | Conflicts acknowledged in general terms only, or not at all |
| 4. Audit | Annual audit by a licensed public accounting firm, clean opinion | No audit, a late audit or a modified opinion not explained |
| 5. Tax status | A description of how each condition is monitored | No explanation of how MIC status is maintained |
The tax conditions matter because a corporation that fails them in a year loses the flow-through treatment for that year. Subsection 130.1(6) sets nine conditions, including at least 20 shareholders, no shareholder holding more than 25% of any class, and at least 50% of the cost amount of property in residential mortgages, insured deposits and money; they are explained in the nine conditions a MIC must meet. This summary is current as of October 2026.
The portfolio and lending policy
The second group asks what the MIC actually lends against and on what terms. The OM states the policy; the financial statement notes and investor reports show the portfolio. The gap between the two is often the most informative thing an investor can find.
- 6. What are the maximum loan-to-value limits, and what is the weighted-average loan-to-value — on as-is values, including any mortgages ranking ahead? — OM lending policy and investor reports
- 7. What share of the portfolio is in first mortgages and what share in second or lower positions? — OM portfolio breakdown and financial statement notes
- 8. What property types does it lend on: completed residential, construction, land, commercial? — OM lending policy and portfolio breakdown
- 9. How is the portfolio split by province and city? — OM, investor reports and the credit-risk note in the audited financial statements
- 10. How large are the largest loan and the largest ten, as a share of the portfolio, and are any borrowers related? — OM or a written request to the manager
- 11. What are the loan terms, and how are maturities spread across the year? — maturity schedule in the financial statement notes
- 12. How many loans are in arrears or enforcement, and what losses have been realised in each of the last several years? — impaired-loan and allowance notes in the audited financial statements, and investor reports
What the answers tell you
| Question | A clear answer | An answer that warrants caution |
|---|---|---|
| 6. Loan-to-value | Stated limits, actual average, basis of value and treatment of prior charges explained | An average with no basis given, or one using as-complete values without saying so |
| 7. Position | A stated split that matches the policy | A rising share of second mortgages without explanation |
| 8. Property type | Lending confined to the types described | Construction or land loans in a fund described as residential |
| 9. Geography | A split by province and city | “Diversified” with no figures |
| 10. Concentration | Largest loans disclosed as percentages, related borrowers identified | Reluctance to disclose the largest exposures |
| 11. Maturities | Staggered maturities with a schedule | Many loans maturing in the same months |
| 12. Arrears and losses | Year-by-year figures, including bad years | “No losses” claimed with no supporting disclosure |
Lending policy differs by MIC, and any example is only that. Lendmax Capital MIC, for instance, states that it lends residential first and second mortgages in Ontario, British Columbia and Alberta on terms of 3 to 12 months, with staggered maturities and concentration limits by region, position and borrower — the sort of statement an investor can then test against the financial statement notes.
Returns, fees and leverage
The third group asks how returns are earned, what is taken out along the way, and whether the MIC borrows to lend more. A higher return comes with higher risk, and these questions show what risk sits behind a given yield.
- 13. How are returns reported: net of all fees, year by year, with the period and basis stated? — OM and the MIC’s performance disclosures
- 14. What fees are charged — management, administration, performance, lender fees and early redemption — and who keeps each one? — OM fee section; see the real fee stack in a mortgage investment
- 15. Does the MIC borrow, how much, from whom, and does that lender rank ahead of shareholders? — bank indebtedness or credit facility note in the audited financial statements
- 16. Have distributions matched net income each year, or been funded in part from capital or new subscriptions? — statement of comprehensive income, statement of changes in equity and statement of cash flows
What the answers tell you
| Question | A clear answer | An answer that warrants caution |
|---|---|---|
| 13. Returns | Net returns by year, periods stated, past performance caveat | A single average or a target presented as a track record |
| 14. Fees | Every fee listed with its rate and recipient | Lender fees or affiliate fees mentioned but not quantified |
| 15. Leverage | Facility size, terms and covenants disclosed | Borrowing that is material but explained only in a note |
| 16. Distributions | Distributions at or below net income over time | Distributions held steady while income falls |
Year-by-year disclosure is more informative than an average because it shows the weak years too. Lendmax Capital MIC, as an example, publishes its net rate of return paid to investors by fiscal year: FY2020 0.00%, FY2021 6.00%, FY2022 7.83%, FY2023 8.15%, FY2024 10.15% and FY2025 13.57%, with a FY2025 target annual return of 9% (source: Lendmax Capital MIC, “Past performance”, updated 19 September 2026). Past performance does not indicate future results. Distributions are not guaranteed and may be reduced or suspended.
On leverage, subsection 130.1(6) caps a MIC’s liabilities at three times its equity where residential mortgages, insured deposits and money are less than two-thirds of its assets, and at five times otherwise. Those are legal ceilings, not norms; any borrowing means a lender with a claim that ranks ahead of shareholders.
Worked example (illustrative)
The figures are assumptions showing how to check question 16. They do not describe any MIC.
A MIC has average capital of $30,000,000. Its loans earn $3,000,000 (a 10% gross yield). Management fees and expenses take $600,000, and it records a $300,000 provision for expected loan losses. Net income is $3,000,000 − $600,000 − $300,000 = $2,100,000, or 7.0% of capital.
The MIC pays distributions of $2,550,000, or 8.5% of capital. Distributions as a share of net income — the payout ratio — are $2,550,000 ÷ $2,100,000 = 121.4%. The extra $450,000 came from capital or from new investors’ money, and the statement of cash flows shows which.
For an investor holding $100,000, the distribution is $8,500, but only $7,000 of it ($100,000 × 7.0%) is supported by the year’s net income. How distributions are characterised for tax depends on the MIC’s taxable income and its year-end designations; under subsection 130.1(2), a MIC’s taxable dividends other than capital gains dividends are received as interest. This is described as at October 2026, and a Canadian tax professional can confirm how it applies. One year above 100% may have an explanation; a pattern does not.
Liquidity and investor terms
The last group asks how money comes back and what the shares actually are. These are the terms investors read least and rely on most when circumstances change. The mechanics are explained in liquidity and redemption.
- 17. How do redemptions work: notice period, redemption dates, any lock-up and early redemption fee? — articles (share terms) and the OM redemption section
- 18. Can the board defer, gate or suspend redemptions or pay by promissory note, and has it ever done so? — articles, OM risk factors and a written request to the manager
- 19. What share classes exist, and how do they rank and share in income? — articles and the OM description of securities; see MIC share structure
- 20. Are the shares a qualified investment for registered plans, and could the planned holding become a prohibited investment? — OM tax section and a Canadian tax professional
What the answers tell you
| Question | A clear answer | An answer that warrants caution |
|---|---|---|
| 17. Redemptions | Notice period, dates and fees stated precisely | “Redeemable at any time” with no conditions given |
| 18. Board powers | Powers described, with any past use disclosed | Past deferrals or suspensions not mentioned when asked |
| 19. Share classes | Each class’s rights and ranking explained | Classes with different fees or priority not explained |
| 20. Registered plans | Eligibility explained, with the prohibited-investment rules noted | Eligibility asserted without reference to the rules |
On question 20: MIC shares can become a prohibited investment for a registered plan under the prohibited-investment rules in section 207.01 of the Income Tax Act — for example, where the plan holder, together with non-arm’s-length persons, has a significant interest of 10% or more of any class. The consequences are explained in the registered-plan trap. This is described as at October 2026.
Questions for the dealer
MIC shares are usually sold through a registered exempt market dealer, under the offering memorandum or accredited investor exemption in National Instrument 45-106. The dealer is a second source of answers, and its own position is worth understanding: how it is paid, whether it is connected to the MIC, and what review it carried out before offering the shares.
- How is the dealer paid for this sale — commission, ongoing fees or payments from the issuer? — OM compensation section and the dealer’s relationship disclosure
- Is the dealer related to or connected with the MIC or its manager? — OM and the dealer’s conflict-of-interest disclosure
- What review of the MIC did the dealer carry out before offering it? — a written request to the dealer
- Which prospectus exemption applies, and does an investment limit apply to this purchase? — subscription agreement and OM
- How did the suitability assessment take account of the investor’s need for access to money and existing real estate exposure? — the dealer’s suitability record
Under the offering memorandum exemption, individuals in Alberta, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan face investment limits over any 12-month period unless they are accredited investors, and other provinces differ. Thresholds summarised; current definitions can be confirmed with a registered dealer. This summary is current as of October 2026.
Common mistakes when choosing a MIC
- Choosing on yield alone. Yield is the reward for the risks in the portfolio; without the portfolio questions, it cannot be judged.
- Comparing returns on different bases. A gross yield, a target and a net historical return are three different numbers.
- Reading the OM but not the financial statement notes. The policy is in the OM; what happened is in the notes.
- Relying on one good year. A sequence of years, including weak ones, says more about management than any single figure.
- Skipping the redemption section. It decides when the investor can leave, and it is the section most often read too late.
What this means for a mortgage investor
Choosing a MIC is a matter of asking the same twenty questions of each candidate and reading the answers in the documents rather than the marketing. The questions map onto the seven axes on which every mortgage investment varies: the borrowers it lends to, the property it lends against, its loan-to-value, its security position, the term of its loans, the jurisdiction in which it lends and enforces, and its investment structure, including fees, leverage and redemption terms. A MIC that can be read clearly along borrower, property, loan-to-value, security position, term, jurisdiction and investment structure gives an investor what they need to judge it; returns remain targets, and principal can still be lost.
Key takeaways
- A MIC can be evaluated on four groups of questions: people and governance, portfolio and lending policy, returns, fees and leverage, and liquidity and investor terms.
- Every question has a document that answers it — the offering memorandum, the audited financial statements, the articles or a public register — and answers given only verbally carry less weight.
- Portfolio figures such as weighted-average loan-to-value mean little without knowing whether they use as-is values and include mortgages ranking ahead.
- Distributions that consistently exceed net income are being funded from somewhere else, and the financial statements show where.
- A higher yield comes with higher risk, and returns are targets, not promises; comparing MICs on yield alone ignores most of what decides the outcome.
Sources
- Income Tax Act, section 130.1 — Mortgage investment corporations — Justice Laws Website, Government of Canada
- Income Tax Act, section 207.01 — Justice Laws Website, Government of Canada
- CSA National Registration Search — Canadian Securities Administrators
- National Instrument 45-106 Prospectus Exemptions — Ontario Securities Commission
- Past performance — Lendmax Capital MIC
- Financial Services Regulatory Authority of Ontario — FSRA