What is a MIC, and how is it actually different from an individual private lender?

A mortgage investment corporation is a corporation that pools capital from multiple investors to fund mortgages, and that qualifies for a specific non-taxable status under section 130.1 of the Income Tax Act as a conduit for flowing mortgage interest income through to its shareholders. To qualify, a MIC must have at least 20 shareholders, and no single shareholder can hold more than 25% of its total share capital.

At least 50% of a MIC's assets must be residential mortgages, cash, or insured deposits at CDIC member institutions. It may invest up to 25% of its assets directly in real estate, but it cannot develop land or engage in construction — a MIC is a mortgage lender, not a builder.

Section 130.1(5) of the Income Tax Act also deems a MIC to be a public corporation for tax purposes, regardless of whether its shares actually trade on an exchange. That deeming provision is part of what makes a MIC's shares eligible to be held inside registered accounts — RRSPs, TFSAs, RRIFs, and similar plans — which is a large part of why individual Canadians are willing to become one of a MIC's 20-plus shareholders in the first place, and therefore why the capital pool a broker eventually taps exists at all.

None of these structural rules are things a broker needs to explain to a borrower in detail, but they explain something borrowers do notice: why a MIC's underwriting process feels institutional rather than personal, with a documented policy and a defined turnaround, even though the MIC itself is still, by regulatory definition, a private lender operating outside OSFI's prudential framework.

Under section 130.1, a MIC deducts the taxable dividends it pays to shareholders from its own income, and those dividends are deemed to be received by shareholders as interest, not as regular dividend income. In effect, the tax is paid once, at the shareholder level, not twice. That structure is exactly why MICs exist as a pooled-capital vehicle in the first place — it makes mortgage lending an efficient asset class for a large group of individual investors to access collectively, which is what funds the pool a broker eventually taps for a client's file.

None of this tax mechanics is something a borrower needs to understand in detail. What matters for a broker is the downstream effect: because a MIC's returns flow through directly to a large shareholder base that expects steady interest-like income, a MIC has a structural interest in keeping its mortgage portfolio performing and its lending policy consistent. That's a different incentive structure from a single private investor who might be more or less flexible depending on what else is happening in their own finances that month.

That same incentive structure is also why a MIC's appetite can shift across a market cycle in a fairly visible, policy-driven way — tightening loan-to-value ceilings or narrowing which property types it will consider when its own delinquency experience rises, rather than making that call file by file. A broker who tracks a given MIC's current appetite, rather than assuming last year's policy still holds, avoids submitting a file the MIC would have accepted six months ago but won't today.

The practical upshot for a broker choosing between the two: a MIC is usually the better fit when the file needs a predictable, repeatable process and the broker has an ongoing relationship with that MIC's underwriting team. An individual private lender can sometimes move faster or flex further on a single unusual point, but that flexibility is personal to that investor and doesn't generalize — what one private lender agreed to on a past file says very little about what the next one will accept.

• →The cost will typically run above a bank's posted rates, and the structure is often interest-only — see private mortgage costs and fees for how that pricing actually breaks down.
• →Terms are usually shorter than a conventional mortgage, with a defined renewal or exit expectation built in from the start.
• →When a mortgage brokerage arranges a transaction with a private lender or investor, including many MICs, FSRA requires the brokerage to complete a Form 1 Investor/Lender Disclosure Statement, signed by a licensed broker — a workflow step worth knowing exists even though it's the brokerage's obligation, not the borrower's.
• →A second mortgage placed with a MIC follows the same priority rules as any other second — see the broker's guide to second mortgages for how that registration order plays out.

It's also worth being upfront with a client that a MIC is a specific type of lender, not a generic label. A client who has heard the term 'private lender' used loosely may assume every private option carries the same risk and cost profile; walking through why a regulated, pooled-capital MIC behaves differently from a single individual's money helps set expectations that hold up once the actual commitment arrives.

Finally, remember that the Form 1 obligation runs through the brokerage regardless of how routine the relationship with a particular MIC has become. It's easy for a busy broker to treat a familiar MIC relationship as informal after dozens of files, but the disclosure requirement doesn't soften with familiarity — each transaction still needs its own signed, current disclosure statement in the file.

One more distinction worth making to a client comparing options: a MIC lending on a client's file is, from the client's side, functionally similar to borrowing from any other private lender — the repayment obligation, the registration on title, and the consequences of default all work the same way regardless of who's on the other side of the transaction. What differs is upstream, in how that lender's capital is raised and governed, which mostly affects how consistent and predictable the process feels, not what the borrower ultimately owes.

That predictability is worth naming explicitly when a broker is choosing between a MIC and an individual private lender for a time-sensitive file. An individual lender who has funded a dozen similar deals without incident can still, on any given file, decide the timing doesn't work for their own liquidity that month — a risk a MIC's pooled capital largely removes, since the fund itself, not any one investor's personal cash flow, is what stands behind the commitment.