People wanting to invest in the GTA housing market have a few different options to consider. One option is to approach a traditional mortgage lender and apply for a mortgage which will go towards buying a property. Another option is with a mortgage investment corporation (MIC), which allows investors to invest in a pool of mortgages.
Which option is best for your situation and can provide the strongest return?
Traditional Mortgage Lender
A traditional mortgage lender, like a bank, provides borrowers with a loan to purchase an approved property. This loan comes with either a fixed or variable interest rate. You will repay the loan over the course of 25 or 30 years depending on what you qualify for. In addition, the amount you receive is based on the information you provide on your application.
Borrowers must use the mortgage to buy a property to either live in, rent to tenants or to flip for profit. Keep in mind, the barrier to mortgage approval is greater now that the Bank of Canada has increased rates and the Government implemented a stress test, which could block 50,000 Canadians from homeownership.
What is a MIC?
A MIC is a method for investors to invest in a pool of mortgages. The portfolio is diversified to mitigate risk and investors have the option to receive their dividends in cash or to re-invest and is eligible to be held in registered savings plan like a RRSP, RRIF or TFSA.
Investors receive niche market focus, experienced professional management and conservative valuations so that portfolios are nurtured and given the best chance at success.
How to Differentiate?
It all comes down to what you want out of your investment. If you want a new home or investment property, then apply for a mortgage with a lender whose terms are the most favourable. If you want an investment opportunity that is strategic, focused and historically provides a return, then a MIC is a viable option.
Contact the Mortgage Company of Canada to learn more about this opportunity.