Questions about Investing in Mortgages?

Whether you’re new to Mortgage investment opportunities or exploring alternatives to traditional fixed-income products, understanding how a Mortgage Investment Corporation works is an important first step. Through a professionally managed Mortgage investment fund, investors can participate in Mortgage investments backed by real property while benefiting from diversification and active risk management.

In this guide, we answer some of the most common questions about MIC investment, including how Mortgage investment companies operate, what investors should know about Mortgage investment corporation Canada regulations, and how Investing in mortgages compares to other forms of Property investment.

What is a Mortgage Investment Corporation (MIC)?

A Mortgage Investment Corporation (MIC) is an investment vehicle that pools money from investors and uses those funds to finance mortgages. Investors purchase shares of the MIC and participate in the income generated from the mortgage portfolio.

For a more in-depth article about what kind of entities MICs are, click the link below.

How does a MIC generate returns?

A MIC earns income primarily from interest payments made by borrowers on the mortgages it holds. After expenses, this income must be distributed to shareholders in accordance with CRA’s MIC Eligibility Rules.

What types of mortgages does a MIC invest in?

Each MIC has its own investment mandate. Mortgage portfolios may include residential, commercial, construction, or other mortgage types and may involve first mortgages, second mortgages, or a combination of both. Armada lends almost exclusively on residential properties.

How is personal suitability determined?

Before recommending an investment, a registered dealing representative must assess whether the investment is suitable based on factors such as the investor’s financial circumstances, investment objectives, risk tolerance, investment knowledge, and time horizon. If you are an investor with Armada, you will be familiar with our Know Your Client or ‘KYC’ form where we ask these questions to help determine your personal eligibility with Armada.

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How to invest in a MIC?

How to invest in a MIC varies between companies. To invest in Armada’s MIC, you will need to make an appointment with one of our Dealer Representatives who will onboard you, which you can do completely online, or in person. After onboarding is complete, funds can be transferred from your institution to a registered Trustee of your choosing such as (Questrade) or (Olympia trust). If you do not already have a Trustee, Armada will assist you with this. Once your investment is live after the share closing, the excitement begins! Your investments performance can be tracked through our investor portal.

Is investing in a MIC the same as investing in a GIC or bank deposit?

No. MIC investments are not guaranteed by a financial institution or government agency. While MICs seek to generate stable income, any investment carries some risk, including GIC’s which are subject to inflation risk.
As an investor, you should always review a potential investment’s financials to determine your personal risk appetite. Armada has never experienced investor loss or draw down since its inception over 30 years ago. Click the links below to view our returns and complete financial statements to see our historical performance.

Historical Returns

Financials: All Years

What are the primary risks of investing in a MIC?

Key risks may include borrower default, real estate market declines, interest rate changes, reduced liquidity, concentration risk, and general economic conditions. Investors should carefully review all risk disclosures before investing. Ask your dealer representative what Armada’s risk management is like.

Who qualifies to invest in a MIC?

Eligibility depends on the exemption being used and applicable securities regulations. Investors are subject to personal suitability and regulatory requirements and may qualify as accredited investors or invest through other available prospectus exemptions.

Why is a MIC considered an exempt market investment?

MIC shares are typically distributed under securities law prospectus exemptions rather than through a publicly filed prospectus. As a result, MIC investments are available only to investors who qualify under specific exemptions or who receive the required exempt market disclosure documents.

What is a prospectus exemption?

A prospectus exemption is a provision under securities legislation that allows securities to be sold without a prospectus when certain conditions are met.

Armada offers shares under the Offering Memorandum which means potential shareholders who are not Accredited Investors are allowed to invest in the MIC fund. To briefly describe, an Accredited Investor is an individual who has financial assets of more than $1 Million or earns an average of more than $200,000 a year.

What other questions can I ask my Dealer Representative before investing?

Is this firm registered with the BC Securities Commission?
- (Click to Search on BCSC) (See Armada’s Registration)
What types of mortgages does the MIC invest in?
What are the major risks?
What is the redemption policy?
How is the portfolio diversified?
What fees and expenses apply?
How has Armada performed historically over the last 30 years?
How is investor capital protected through underwriting and risk management practices?

And as always, investors should carefully review all offering documents and consult their own professional advisors before making any investment decision.

We hope this guide has helped answer some of your key questions about MIC investment, investing in mortgages, and the role that mortgage investment companies play in the Canadian investments landscape. If you’d like to learn more about Armada investing, our approach to capital preservation, or how a mortgage investment fund may fit within your portfolio, we invite you to explore our additional resources and speak with our team.