Borrowing From a Mortgage Investment Corporation (MIC) in Canada
Mortgage Investment Corporations are federally regulated pools of investor capital — governed under the Income Tax Act — that lend primarily on real estate equity rather than borrower creditworthiness. Rates run 8–12% in the current environment, materially above B-lenders (6.5–8%), but MICs move faster, require less documentation, and will fund files that institutional lenders decline outright. The strategic use case is a defined short-term hold — typically 12–24 months — while the borrower repairs credit, stabilizes income, or completes a transaction that cannot wait.
Who this is for
Borrowers with bruised credit, recent consumer proposals, non-standard income, or properties that fall outside prime and B-lender appetite — typically seeking short-term bridge financing while rebuilding toward conventional qualification.
- Property value (appraisal)
- $900,000
- MIC maximum advance (65% LTV)
- $585,000
- MIC rate (first mortgage, 65% LTV)
- 10.5% (interest-only)
- Monthly interest cost
- ~$4,594 on $525,000 drawn
- Lender fee (typical MIC)
- 1.0–2.0% of loan amount, paid at funding
Framework
What a MIC is and how it is regulated
A Mortgage Investment Corporation is a flow-through investment vehicle defined under Section 130.1 of the Income Tax Act. MICs must have at least 20 shareholders, invest at least 50% of assets in residential mortgages or cash, and distribute 100% of net income to shareholders annually — which is why they are not subject to corporate income tax at the entity level. They are not federally regulated lenders under OSFI's B-20 guideline; instead, provincial mortgage broker legislation governs how MIC loans are originated and disclosed. In Ontario, MIC brokers are licensed under FSRA. This regulatory gap is precisely why MICs can underwrite files that B-20-compliant lenders cannot — they are not bound by the stress test, GDS/TDS ceilings, or OSFI's LTI portfolio limits.
Rate and fee structure versus B-lenders and private lenders
The lending-cost spectrum in 2025–2026 runs roughly as follows: prime insured (5.0–5.5% 5-year fixed), prime uninsured (+15–30 bps), B-lenders (Equitable, Home Trust, Haventree, Manulife One) at 6.5–8.0% plus a 0.5–1.0% lender fee, MICs at 8.0–12.0% plus a 1.0–2.0% lender fee, and individual private lenders at 10–15% with fees that can reach 3–5%. MICs sit between B-lenders and pure private capital. The rate premium over B-lenders is real — on a $500,000 mortgage, 250 bps costs approximately $12,500 per year in additional interest — but MICs fund in days rather than weeks and will accept files with credit scores below 550, recent insolvency, or properties in secondary markets that B-lenders decline on collateral grounds alone.
Underwriting criteria: what MICs actually look at
MIC underwriting is equity-first. The primary question is: if this borrower defaults, can the MIC recover principal through a power-of-sale or foreclosure? Most MICs cap first-mortgage LTV at 65–75% on residential properties; second mortgages are typically capped at 75–80% combined LTV. Income verification is lighter than B-lender standard — many MICs accept a letter of employment, 3 months of bank statements, or self-declared income with a plausibility check. Credit score is reviewed but not determinative; a score of 480 with a discharged proposal and clean post-discharge behaviour is fundable at most MICs. Property type matters: urban single-family and condo in major markets get the best LTV; rural, acreage, or unique properties attract lower LTV and higher rates.
Loan structure and term mechanics
MIC mortgages are almost universally interest-only, open or short-term closed — 6-month, 12-month, and 24-month terms dominate. Open structures allow repayment without penalty, which matters when the exit is a refinance to a B-lender or prime lender. Closed MIC terms carry prepayment penalties that vary by MIC — some charge 3 months' interest, others charge the full remaining term. Confirm the prepayment clause before signing; a 12-month closed term with a 6-month interest penalty can eliminate the savings from an early refinance. Most MICs register a standard charge (not a collateral charge), which simplifies switching to a new lender at maturity without legal fees for a new charge registration.
The exit strategy — why it must be defined before you enter
A MIC mortgage without a credible exit plan is a debt trap. The exit options are: (1) refinance to B-lender once credit score recovers to 580–620 and 12–24 months of clean payment history is established; (2) refinance to prime once score exceeds 680 and income documentation normalizes; (3) sale of the property if equity is the primary asset and the borrower is downsizing or relocating; (4) renewal with the same MIC if none of the above is achievable — but at the MIC's discretion and potentially at a higher rate. Lenders and brokers should model the exit at origination: what credit score is needed, what income documentation will be required, and what the property value needs to be at the refinance date. Build that timeline into the term selection.
Broker and disclosure obligations
In Ontario, brokers placing MIC mortgages must comply with FSRA's mortgage brokering rules under the Mortgage Brokerages, Lenders and Administrators Act (MBLAA). This includes a cost-of-borrowing disclosure, a suitability assessment, and — for second mortgages above certain thresholds — a mandatory 2-business-day cooling-off period. British Columbia's Financial Institutions Act and Alberta's Real Estate Act impose similar disclosure requirements. Borrowers should receive a full fee disclosure: broker fee (typically 1–2% paid by borrower on private/MIC files), lender fee, appraisal cost, and legal fees for both sides. Total transaction costs on a $500,000 MIC mortgage routinely run $8,000–$15,000 at origination — this must be factored into the cost-benefit analysis versus waiting for a B-lender approval.
Key considerations
- MIC mortgages are not subject to OSFI's B-20 stress test, which is why they can fund files that federally regulated lenders cannot — but this also means the borrower has no stress-test buffer built into the qualification. If rates rise at renewal, the borrower may not qualify for the exit lender either.
- The appraisal ordered by the MIC is the MIC's appraisal — it protects the lender, not the borrower. Commission a separate independent appraisal if you have any doubt about the property's market value, particularly in markets that have softened since 2022.
- MIC rates are typically variable or reset at each short term, not locked for 5 years. In a rising-rate environment, a 12-month open at 10.5% could renew at 11.5% if the borrower's exit is delayed. Model the worst-case renewal rate, not the current rate.
- Not all MICs are equal in underwriting discipline or capital stability. A MIC that is heavily concentrated in one geography or property type carries concentration risk — if that market softens, the MIC may tighten LTV or decline renewals. Ask the broker which MIC is funding the loan and review its track record.
- Second-mortgage MIC placements behind an existing prime or B-lender first mortgage require the first lender's consent in most cases, or at minimum notification. Failure to disclose a second mortgage to the first lender can trigger a default clause.
Common mistakes
- Entering a MIC mortgage without a written exit timeline — borrowers who treat a 12-month bridge as a rolling annual product can find themselves 3 years in at 11%, having paid $165,000 in interest on a $500,000 balance with no improvement in their prime-lender eligibility.
- Ignoring total transaction costs at origination — a $500,000 MIC mortgage with a 1.5% lender fee, 1.5% broker fee, $2,500 appraisal, and $3,000 in legal fees costs $18,500 upfront before the first interest payment. Borrowers who compare only the rate miss this.
- Assuming the MIC will automatically renew — MICs are not obligated to renew at maturity, and a MIC that has tightened its LTV policy or experienced redemption pressure from its own investors may decline renewal, forcing a rushed refinance or sale.
- Placing a MIC second mortgage without disclosing it to the first-lender — most first-mortgage contracts prohibit additional encumbrances without consent. Discovery triggers a default notice and potential power-of-sale proceedings.
- Choosing a closed MIC term to get a marginally lower rate, then refinancing to a B-lender 8 months in — the prepayment penalty (often 3–6 months' interest) can exceed the rate savings from the closed product entirely.
- Not rebuilding credit during the MIC term — the MIC period is the window to add secured trade lines, clear collections, and establish 12 months of on-time payments. Borrowers who do nothing during the term arrive at maturity with the same credit profile and no exit options.
Action steps
- 01Before approaching a MIC, calculate your current LTV precisely using a recent appraisal or comparable sales — MIC approval and rate tier are almost entirely driven by this number, and an inflated estimate will produce a declined file or a repriced offer at funding.
- 02Define your exit lender and exit criteria in writing before signing the MIC commitment: target credit score, income documentation type, and the B-lender or prime lender you intend to refinance with at maturity.
- 03Request a full fee disclosure from your broker itemizing lender fee, broker fee, appraisal, and legal costs on both sides — then calculate the all-in annualized cost of the MIC mortgage including fees amortized over the term.
- 04Open a secured credit card or credit-builder product within the first 30 days of the MIC term and use it to generate 12 months of on-time payment history before your exit refinance application.
- 05Confirm the prepayment terms in the MIC commitment letter — specifically whether the mortgage is open, and if closed, the exact penalty calculation method. Negotiate open terms if the rate differential is less than 50 bps.
- 06Engage a broker with documented MIC placement experience and access to multiple MICs — rate and LTV spreads across MICs on the same file can vary by 150–200 bps, and a single-MIC broker cannot optimize this.