Investment Q&A

A mortgage investment corporation (MIC) is a type of company in Canada that pools money from investors to lend out mortgages to borrowers. MICs typically fund Canadian residential mortgages, but they can also lend out or invest in certain other assets. The income that a MIC receives, which is the mortgage interest that borrowers pay, is then distributed to the shareholders of the MIC in the form of dividends. MICs allow Canadians to invest in a diversified portfolio of mortgages, with other benefits. For example, MICs don’t pay any income tax, which allows them to avoid double taxation and can boost investment returns. In exchange for this, MICs have to follow specific rules based on the Income Tax Act. For example, they can only deal with properties in Canada, and they must invest at least 50% of their assets in residential properties or deposits. Thus, they can invest up to 50% of their assets in commercial mortgages. Dividend income is taxed as interest income to Canadians. Some are private (which we do not follow nor recommend) and some are public. Private deals can be typically arranged directly, and they will often advertise for investors. Public companies such as AI and FC can simply be bought like a stock. These are typically small and thus higher risk. But income is typically steady. We would prefer an alternative, much-larger financial stock such as FN within this sector.