What is a mortgage investment corporation?
A Mortgage Investment Corporation, or MIC, is a unique investment and lending entity specializing in Canada's real estate sector. MIC shareholders have the opportunity to invest in a diversified portfolio of mortgages, primarily short-term residential, while avoiding the responsibilities of property ownership and management. MICs operate as flow-through investment vehicles, enabling the full net income to be distributed to shareholders. MIC investments can be held within registered portfolios like RRSP, RESP, LIF, RRIF, LIRA, RDSP, IPP (individual pension plan), DPSP, or TFSA, in accordance with the Canada Income Tax Act.
What are the mortgage investment corporation regulations in Canada?
All Mortgage Investment Corporations adhere to Section 130.1 of the Income Tax Act, which prescribes specific regulations concerning their investment composition and borrowing limits. In general, the key investment guidelines include:
- 50% of investments must be in residential mortgages, defined by the National Housing Act, combined with cash or deposits with insured institutions.
- The value of a single property cannot exceed 25% of all MIC properties.
- MICs are authorized to lend funds secured by Canadian real estate and cannot own foreign properties.
- Ownership of shares in non-resident corporations is prohibited.
- MICs may not engage in real estate development or property management.
- A minimum of 20 shareholders is required, with no one shareholder owning 25% or more of the issued shares.
- A MIC may leverage up to five times the cost of its assets if at least two-thirds of its assets are in residential mortgages and/or insured bank deposits.
All income generated by a Mortgage Investment Corporation is directly distributed to shareholders as dividends, taxable as interest income in the hands of shareholders. These dividends, representing the MIC's annual taxable income, must be disbursed within 90 days of its year-end. At the corporate level, MIC treats these dividends as company expenses, resulting in a tax-exempt status for the corporation.
Is Lendworth a lender subject to regulatory oversight?
Indeed, Lendworth operates within the framework of regulatory oversight, and our mortgage fund complies with the necessary governmental requirements to be classified as a mortgage investment corporation. We place a strong emphasis on adhering to regulations and are dedicated to providing full transparency, disclosure, and competence to our shareholders and borrowers at every stage of our operations.
How does Lendworth Mortgage Investment Corporation operate?
Lendworth Mortgage Investment Corporation specializes in mortgage investments, managing a diverse portfolio of mortgages to provide investors with various investment opportunities. Our operations encompass mortgage origination, servicing, and, when required, foreclosure. MIC funds are comprised of portfolios of mortgage assets, financing mortgages with distinct attributes, and characteristics. The interest payments from borrowers drive investor returns.
What's the difference between Lendworth MIC and traditional investments?
Lendworth MIC, unlike conventional stocks and fixed income securities, belong to the realm of alternative asset classes. These alternatives demonstrate lower correlation with the broader public market, distinct from the interdependence of stocks, bonds, and cash. Lendworth MIC present investors with an opportunity to diversify their portfolios with income-generating assets less susceptible to typical market fluctuations.
Are Lendworth MIC investments guaranteed?
No, investments with Lendworth MIC are not guaranteed. Nevertheless, our stringent due diligence procedures effectively mitigate risk. Our team of experienced underwriters meticulously assess the risk associated with each mortgage, and we maintain a policy to limit any single mortgage's exposure within a Lendworth MIC fund to no more than 10%. We proactively monitor every mortgage within our MICs throughout their term to ensure they maintain good standing, resulting in a low loan loss rate. Additionally, the presence of collateralized real estate further bolsters risk mitigation for each mortgage.
How does investing in Lendworth MIC differ from investing directly in real estate?
When you choose to invest in a Lendworth MIC fund, you're investing in a collection of mortgages rather than directly acquiring individual properties. This approach provides enhanced diversification compared to a direct real estate investment, as your investment is spread across multiple mortgage assets, each of which is supported by collateralized real estate security.
What are the appealing aspects of investing in Lendworth?
- Lucrative Return Potential: Lendworth has witnessed substantial gains thanks to the robust Canadian real estate market in the past decade. Alongside an active investment management approach and a strong focus on safeguarding capital, Lendworth provides an enticing prospect for investors seeking alternatives to traditional fixed income products.
- Low Correlation with Stock Market Volatility: Mortgage investments within Lendworth exhibit minimal correlation with the fluctuations of the stock market. This characteristic makes them a viable option for investors in search of assets that operate independently from publicly traded markets.
- Backed by Tangible Real Assets: Lendworth's investments are secured by real estate assets, reinforcing capital preservation strategies and bolstering investor confidence.
- Thorough Due Diligence Process: Lendworth's active investment management philosophy underscores prudent lending practices and capital preservation. Their rigorous mortgage underwriting and management program has resulted in an impressively low loan loss rate, remaining under 1% to date.
- Eligibility for Registered Plans: Investments in Lendworth can be made within tax-sheltered plans, including RRSPs, RESP, RDSPs, RRIFs, and more, providing tax advantages to investors.
- Diversification: Lendworth's MIC Funds maintain a diversified portfolio of residential mortgages, spreading risk across various factors such as geographical location, mortgage and borrower type, and investor profile. This diversification enhances the stability and resilience of the investment.
What is the required capital to invest in Lendworth?
Investors interested in acquiring Lendworth MIC shares must have a minimum investment of $5,000. Lendworth offers investors an avenue to participate in the mortgage investment market with significantly less capital compared to direct investments in individual mortgage assets.
Is Lendworth a suitable choice for short-term investments?
Lendworth's MIC products have a minimum investment term of two years. After 24 months, you may redeem shares with a 60-day notice, and these redemptions are processed quarterly. Please note that a redemption fee of 2% applies in the first year, and 1% in the second year should you decide to redeem early.
Could I invest into Lendworth using registered funds?
Indeed, Lendworth Mortgage Investment Corporation investments qualify for RRSP, RESP, TFSA, RRIF, RDSP, and LIRA investments.
Cash Funds:
Cash funds, typically located in your chequing or savings accounts, can be employed to acquire Class B shares in Lendworth MIC. After satisfying regulatory requirements, you will receive the essential documentation. Subsequently, you can furnish us with a Pre-Authorized Deposit form, bank draft, or cheque for the designated investment amount.
Registered Funds:
Utilizing registered funds presents an excellent avenue for investing in Lendworth MIC. Through our partnership with Olympia Trust Company, investors can seamlessly channel their registered funds into the Class B Shares offered by Lendworth MIC. Explore the information links below to understand registered funds and the functioning of separate accounts in Canada.
What is the process for converting my funds into shares in Lendworth MIC?
Shares in Lendworth MIC are directly linked to the principal investment amount, with a simple rule: for every dollar invested in the Lendworth MIC, you receive a corresponding $1 class B share. Each of these shares entitles the investor to a portion of the total yield generated by Lendworth MIC.
How can I invest in Lendworth MIC?
Investing in Lendworth MIC is accessible if you meet the qualifying criteria under the Ontario Securities Commission exemptions. These may include the Accredited Investor, Family, Friends, Business Associates, and Minimum Investment Exemptions.
Where can I access resources for shareholders?
You can find our shareholder resources in a dedicated section on our website. Within this section, you will discover our Corporate Presentation, offering an overview of Lendworth Mortgage Investment Corporation. Our Investment Summary provides disclosure to our shareholders regarding expectations, and we also offer a Policies and Procedures Manual to help you understand our operational processes. Additionally, we regularly post our monthly rate sheets for your review.
How do I invest in Lendworth if I meet the exemption criteria?
If you meet the exemption criteria, you can initiate the investment process by first reviewing Lendworth Mortgage Investment Corporation's Offering Memorandum and Investment Summary. After your review, you will need to provide your personal or corporate information to a Lendworth team member. This step allows us to prepare the Subscription Agreement for your review and eventual signature.
What should I expect after signing the Subscription Agreement?
After you've signed the Subscription Agreement, you will receive copies for your records, and our asset management team will begin processing your subscription. You can use either cash or registered funds, and you'll need to provide Lendworth with instructions for accessing your contributions. Subsequently, you will receive a direct deposit on the first day of each month for your accumulated investment.
What level of ongoing support, communication, and transparency should I anticipate?
Lendworth is dedicated to maintaining continuous communication, offering regular updates, ensuring transparency, and furnishing our shareholders with consistent disclosures regarding the performance of our mortgage fund. We furnish monthly, quarterly, and annual updates to keep you informed and engaged in our overall operations.
What are the targeted returns and how does the fund operate?
Lendworth targets annual returns between 8% and 9%, primarily investing in mortgages with a maximum Loan-to-Value (LTV) of 85%, with a focus on major city centers in Toronto and its surrounding areas.
The Lendworth MIC fund consists of a blend of first and second mortgages, typically with one-year terms. Our underwriting procedures involve collaborating with licensed mortgage brokers and agents to facilitate loan origination.
We predominantly rely on property appraisals conducted by recognized institutions to assess the property values. As an extra layer of diligence, the Lendworth team leverages their experience as licensed realtors and mortgage professionals to further verify property values, including taking into account the potential legal implications with our in house legal experts.
In which regions or areas does Lendworth MIC offer mortgage financing?
Lendworth MIC presently offers mortgage financing to borrowers in key urban areas within Southern Ontario. Our underwriting practices are designed to minimize risks, as we extend financing to properties with a relatively high level of liquidity, ensuring a more secure position in case of power of sale or foreclosure proceedings. Safeguarding our shareholders' investment capital remains our foremost priority.
How are the returns distributed to shareholders of Lendworth?
Lendworth disburses funds on a monthly basis through direct deposit to a specified account for non-registered funds. In the case of registered funds, the monthly distributions will be channeled to the respective trustee. Additionally, investors have the option to participate in our Dividend Reinvestment Program (DRIP) if they wish to reinvest their monthly income.
What is the DRIP program?
Lendworth offers a Dividend Re-investment Program, commonly known as a DRIP program. This program automatically reinvests dividends earned from our fund, further boosting your investment's principal amount and compounding your returns. For investors interested in this strategy, Lendworth MIC provides access to DRIP programs.
How is the management of the Lendworth fund structured?
Lendworth MIC entrusts Royal Canadian Asset Management (RCAM) with the oversight and daily management of the fund's operations. RCAM boasts extensive experience, with over $100,000,000 in assets under management and a track record of managing thousands of mortgages over the past decade.
Will Lendworth furnish me with the necessary tax documentation?
Certainly. We will ensure that all pertinent tax documents are dispatched to investors within 90 days following the end of the year.
