5 Things You Should Know Before Dealing with MICs
Want to become a mortgage investor? Canadian investors are increasingly making investments in the mortgage industry via private mortgage investment firms, or MICs. With the interest rates experiencing a downfall in the recent years, mortgage investments in British Columbia has seen a good surge.
Compared to conventional fixed income investments, MICs offer consistent returns and significantly higher yields with an investment amount starting for just $10,000. Whether you are a seasoned investor or investing for the first time, there are few aspects of MICs you must be aware of.
- What Are Mortgage Investment Corporations (MICs)?
Investments in Canadian private mortgages are made by capital pools or mortgage pools, known as MICs. They give individual investors the direct access to the mortgage market and their performance is supervised by the OFSI, the federal supervisor of financial institutions.
Because of their corporate structure, mortgage investment corporations are exempt from income tax, enabling them to pay out all of their profits to investors. Although the regulations allow them to own up to 25% of real estate, MICs often maintain the great majority of their assets in high-yield residential mortgages.
- Who Do MICs Lend To?
People who would or have been denied credit by more conventional institutions such as banks, credit unions, or major alternative lenders can apply and get approved for a mortgage with mortgage investment corporations. Since the borrowers have been denied a mortgage earlier, MICs usually charge a hefty interest rate from them.
- What Makes MICs Attractive To Investors?
You only need to examine comparable fixed income assets to see why MICs are so appealing. These days, it’s hard to find a GIC that pays even 2% for a one-year term. Even for 10-year maturities, the yields on government bonds are relatively low.
- What Are The Investment Risks?
Given the low interest rates on prime mortgages, a borrower who pays roughly 10% a year is clearly a subprime borrower. The MIC may not get all of its money back when it seizes and sells the asset if values start to decline and a borrower defaults. Third, they perceive the possibility of a “liquidity mismatch”: MIC investors have reportedly been assured that they will have quick access to their money if they so choose, but if majority of investors hurry to leave, the MIC may not have enough cash on hand.
- What Investors Should Opt For?
For investors in mortgage investment corporations, there are several potential motivators:
a) The number of non-performing mortgage loans is rising.
b) Concern among the public regarding the housing market’s condition
c) If certain MICs forbid redemptions, investors in other capital pools may attempt to sell off their own interests.
So, these were some of the important considerations or aspects of mortgage investment corporations in Abbotsford you must be aware of before planning to make an investment. If you are looking for a reliable mortgage pool in British Columbia to invest in, Versa Platinum is your go-to choice. With a minimum investment of just $10,000, earn significant returns.
