Canadian Mortgage Investments – MIC vs DMI

Investors are constantly searching for the best return on investment in Canada, something that offers stability, predictable income, and protection against market swings. Two strategies that often stand out are Mortgage Investment Corporations (MICs) and Direct Mortgage Investing (DMI).

Both fall under the umbrella of mortgage investing, and both are considered alternative investments compared to traditional bank products like GICs and bonds. The difference comes down to how investors participate, how the risks are spread, and how income is earned.

This guide breaks down everything you need to know about mortgage investment corporations and direct mortgage investing, including risks, returns, and who each is best suited for.

A Mortgage Investment Corporation (MIC) is a Canadian investment vehicle that allows multiple investors to pool their money together to fund real estate mortgages. MICs were introduced in 1973 and regulated under the Canadian Income Tax Act to make private lending more accessible.

Here’s how it works:

In short, a MIC is a way for investors to invest in private mortgages without having to manage the process themselves.

MICs spread investor money across many mortgages, reducing exposure to any single borrower and creating a safer, more balanced portfolio for long-term consistent growth and capital protection.

Investors don’t have to deal with underwriting, appraisals, or borrower communication, the MIC’s managers handle it all.

MICs often have lower minimums than DMIs, making them a practical entry point for those curious about private mortgage investment.

Unlike most corporations, a mortgage investment corporation in Canada doesn’t pay income tax itself. All profits flow through to investors. Even better, MIC shares can be held inside RRSPs, TFSAs, or RESPs, allowing for tax-sheltered growth.

Many Canadian mortgage investment corporations aim to provide annual returns between 6% and 10%, with steady dividend payments made monthly or quarterly.

To reduce risks, reputable MICs keep loan-to-value ratios (LTVs) conservative (usually 60–70%) and rely on accredited appraisers.

Hosper also offers several Mortgage Investment Corporation (MIC) funds for investors who prefer a diversified approach. These include Hosper’s conservative investment fund (Class B), designed for stability; the balanced investment fund (Class A), which blends steady income with moderate growth; and the high yield mortgage fund (Class C), focused on higher returns for those comfortable with more risk.

Together, these options give investors flexibility to align their portfolios with their personal goals, whether that means prioritizing security, balance, or maximizing yield through private mortgage investing.

Hosper’s Paragon Process ensures that all capital going into its 3 MIC classes is secure and robust.

A Direct Mortgage Investment (DMI) is different. Instead of pooling money, the investor directly funds one mortgage loan. The loan is registered on the property title, creating a direct one-to-one relationship between the investor and the borrower.

Here’s the process:

Unlike MICs, direct mortgage investing offers more control but also more concentration risk, since the return depends on one property and one borrower.

DMIs often pay 8–14%, making them some of the highest yield investments in Canada outside of equities.

Investors know exactly which property their money is tied to and can review the borrower profile, appraisal, and loan structure.

Loans are backed by real estate. In Canada’s strong real estate market, that collateral offers comfort to many investors.

Because the mortgage is registered on title, the investor’s interest in the property is legally secured.

Mitigating risk depends on strong underwriting, low loan-to-value ratios, and reliable home property appraisals.

For investors who prefer hands-on mortgage investing, Hosper offers a structured Direct Mortgage Investment program in Ontario.

Key features:

Hosper also applies its Paragon Process, a system of accredited appraisers, strict underwriting, and renovation partners to maximize recovery if a borrower defaults.

Both options provide exposure to the Canadian real estate market but serve different investor needs. MICs focus on diversification and convenience, while DMIs emphasize control and potentially higher yields.

Both MICs and DMIs often include second mortgages. These sit behind first mortgages, meaning the first lender has priority if a borrower defaults. The same exists for third mortgages, except they are not as common due to the higher risk involved.

Why second mortgages?

Because of the higher default risk, second mortgages require strict underwriting, cautious LTV ratios, and reliable appraisals.

Whether you invest through a MIC or a DMI, the home property appraisal and LTV ratio are the cornerstones of risk management.

Lower LTV means less risk for investors. Both MICs and DMIs use this metric heavily when screening loans.

For many Canadians, MICs and DMIs strike a balance between traditional fixed income and higher-yield alternatives.

As traditional lenders like banks tighten borrowing rules, demand for private mortgages continues to grow. Borrowers who don’t fit bank criteria, self-employed workers, newcomers, or those needing short-term bridge financing, turn to MICs and private lenders.

This means ongoing mortgage investment opportunities for private investors. With Canada’s housing demand staying strong, both MICs and DMIs are expected to remain attractive alternative investments.

So, which is better, Mortgage Investment Corporations or Direct Mortgage Investment? The answer depends on your goals.

Both approaches allow you to invest in mortgages, earn passive income, and gain exposure to Canada’s strong real estate market without becoming a landlord. With Hosper, both types of investments are secured by the Paragon Process, ensuring investor capital is protected.

For investors seeking the best return on investment in Canada, MICs and DMIs are two proven strategies worth considering. With professional management, careful appraisals, and a focus on capital protection, firms like Hosper Mortgage make these mortgage investment opportunities accessible and rewarding.