MICs vs. Private Lenders: What’s the Difference?
In Canada’s ever-evolving real estate lending landscape, both Mortgage Investment Corporations (MICs) and individual private lenders play a vital role in filling the gaps left by traditional banks. But while they serve similar borrower profiles, they do so with very different structures, risk profiles, and investment strategies.
Understanding the key differences between MICs and private lenders is essential—whether you’re an investor looking to generate steady income, or a mortgage broker seeking the right fit for your client.
The Basics
Private Lenders
A private lender is typically an individual or small group that lends their own capital directly to borrowers, often for a single mortgage or a small set of transactions. Private lenders are generally involved in short-term, asset-backed lending—such as bridge loans, second mortgages, or loans for borrowers who fall outside traditional bank criteria.
Mortgage Investment Corporations (MICs)
A Mortgage Investment Corporation (MIC) is a pooled investment vehicle governed by Section 130.1 of the Income Tax Act. Investors purchase shares in the MIC, and the pooled capital is used to finance a diversified portfolio of mortgages. MICs are professionally managed entities that, despite varying investment objectives and management styles, generally offer dedicated teams for underwriting, servicing, and compliance to ensure efficient portfolio oversight.
Key Differences at a Glance
Diversification: The Key Differentiator
One of the most significant distinctions lies in risk management through diversification.
A private lender puts capital into a single deal—so if that mortgage defaults, the financial impact can be severe. A MIC, by contrast, spreads investor capital across many mortgages, balancing risk across borrower types, loan sizes, geographies, and property types.
For investors, this means that a single borrower default is far less likely to disrupt overall returns when compared to private lending.
Active vs. Passive Investment
Private lending is high-touch. The lender must assess borrower risk, negotiate terms, secure legal documentation, and manage collections or enforcement if needed. It can be profitable, but time-consuming and potentially stressful.
MICs offer a turnkey, passive investment. Investors rely on the MIC’s management team to oversee all underwriting, servicing, and recovery efforts—freeing them from day-to-day involvement while still earning income.
Return Expectations
Private lenders may earn higher returns on a single mortgage—especially if they take on elevated risk or invest in second or third positions. However, this also comes with a higher chance of loss and cashflow disruption.
MICs, on the other hand, provide more stable returns. Because income is derived from a broad pool of loans, dividends are typically paid monthly or quarterly. This reliability appeals to investors seeking income generation with capital preservation.
Who Might Prefer Private Lending?
Private lending might suit:
- Experienced individuals with time, resources, and expertise to underwrite and manage loans
- Investors looking for higher-yield, short-term opportunities
- Those comfortable with direct borrower engagement and risk assessment
Who Should Consider a MIC?
MICs are ideal for:
- Investors seeking consistent, passive income
- Those who want exposure to real estate-backed lending without managing loans themselves
- Individuals looking to diversify holdings across multiple mortgages and geographies
- RRSP, TFSA, and RRIF investors—MICs are often eligible for registered accounts
Conclusion
Both MICs and private lenders serve an important purpose in the Canadian mortgage market. However, they cater to different risk tolerances, capital levels, and investor preferences.
If you’re seeking hands-off, diversified exposure to the private mortgage space, MICs offer a compelling and structured path. For those who prefer a more active approach and are equipped to handle the risks of single-loan investments, private lending can offer attractive—but less predictable—returns.
At the end of the day, understanding your own investment goals, time horizon, and risk tolerance is key to choosing the right approach.
Contact a Dealing Representative today to learn how you can start investing with confidence and achieve consistent returns.
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This document does not constitute an offering of securities. The securities are offered exclusively through an Offering Memorandum provided by Advanced Capital Corporation, a registered dealer, in compliance with applicable securities laws. The information contained in this summary is incomplete and is provided for informational purposes only. The financial returns discussed herein are target projections and may not accurately predict future performance. Investors are encouraged to review the full Offering Memorandum and consult with a financial advisor before making any investment decisions.
