A Mortgage Investment Corporation (MIC) is an investment vehicle that pools funds from investors to provide mortgage loans, primarily focusing on real estate borrowers who may have difficulty obtaining financing from traditional banks. MICs are regulated under the Income Tax Act and must distribute a substantial portion of their income to maintain tax-exempt status.
Benefits of Borrowing from a MIC:
Accessibility
MICs often cater to borrowers who may not meet the stringent criteria of traditional lenders, such as those with lower credit scores or unconventional income sources.
Faster Approval Processes
The application and approval process with a MIC can be quicker and more streamlined compared to traditional banks, allowing borrowers to access funds more rapidly.
Flexibility
MICs may offer more flexible terms and conditions, including varied repayment options and the ability to negotiate customized loan structures that suit specific borrower needs.
Lesser Documentation Requirements
Borrowers may face fewer documentation requirements, which can be advantageous for self-employed individuals or those with complex financial situations.
Variety of Loan Products
MICs often provide a range of mortgage products, including short-term loans, bridge financing, and construction loans, catering to different borrowing needs.
Local Knowledge
Many MICs focus on specific geographical areas, which means they may have a better understanding of local real estate markets and conditions. Some MICs concentrate on the Greater Toronto Area while others focus on cottage country, or smaller communities in Ontario.
Potential for Higher Loan-to-Value Ratios
MICs might be willing to lend at higher loan-to-value ratios than traditional lenders, making it easier for borrowers to secure financing.
Conclusion
While borrowing from a MIC can be beneficial, it’s important for borrowers to consider the potential for higher interest rates and fees compared to dealing with banks or credit unions in Canada. Before using a MIC you should always consider what your exit strategy will be when the mortgage matures.
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