Frequently Asked Questions

 1/ What is a mortgage investment corporation or M.I.C.?

A mortgage investment corporation is an investment vehicle which allows investors to pool their funds for investment into mortgages. As a mortgage investment corporation, The Permanent Mortgage Investment Corporation (the “M.I.C.”) will effectively operate as a tax-free “flow-through” conduit of profits to its shareholders as allowed under Canadian Income Tax Act.

2/ What rate of return can I expect for my investment?

THE RATE OF RETURN ON THIS INVESTMENT IS NOT GUARANTEED. Due to the nature of this business combined with the ever changing lending interest rates it is impossible to guarantee a rate of return. Our TARGET is to provide a rate of return of 9% or greater to our investor on an annualized basis. We anticipate lending the funds to our borrowers at mortgage rates of between 11% and 14%. We expect our average mortgage to carry a rate of 12%. Please note that these are only estimates and subject to change as market conditions dictate. 

3/ In what geographic area will mortgages be granted?

We intend to focus our lending in the Greater Toronto Area (GTA). If we participate in or purchase an existing pool of mortgages, some of the mortgages may be outside the GTA. In this case we will reduce our Loan To Value exposure appropriately for such investments. We will not lend in rural areas or areas suffering from extraordinarily harsh economic conditions. We may lend in “cottage/vacation” areas with reduced loan to value exposure. These cases will be authorized on an exception basis and will not account for more than 5% of the total portfolio.

4/ What is the maximum Loan To Value that will be granted on an individual property?

The overall fund will not exceed 80% LTV. We will have the authority however to advance up to 85% on any given property. This will be done on an exception basis and only with the approval of the Credit Committee.

5/ How does the Manager get paid?

There are two ways in which we get paid.

The first calculation is for Investors’ money lent to mortgage clients. we will take 20% of the interest earned on the mortgage. For example if the rate on the mortgage in 12%, we would earn 2.4% for our management services and the M.I.C. would earn 9.6%. If the interest earned is 13% then we would get 2.6% and the M.I.C. would get 10.4%. (Note: For the purpose of the foregoing we have assumed that the MIC will have no costs or expenses other than management fees. See the description of ongoing costs in the response to question 6 below).

The second calculation is for the lending of leveraged funds. It is our plan to borrow, from an institutional lender, against mortgages funded through the sale of shares.   This should enable the fund to borrow approximately three to four times the amount of funds raised through the sale of shares and subsequently lend those funds out. Because there is a cost associated with borrowing the leveraged funds we will generate less net interest income per dollar of borrowed funds as compared to the equity funds however because we will be able to borrow more debt than the equity funds that we raised, in absolute dollars we will generate more net interest income by borrowing from the institutional lender.  With the borrowed funds there is a significant amount of extra work involved with managing the debt, including the ongoing reporting and documentation required by the lender. This is the reason for the two different rates for management compensation. For the second calculation after the cost of borrowing funds had been paid along with any incidental expenses, profit will be split 50/50 between the management company and the investors.

 PLEASE NOTE: THIS IS AN EXAMPLE ONLY AND IS NOT MEANT TO BE A GUARANTEED RETURN. ACTUAL RESULTS MAY VARY.

6/ What ongoing costs will be charged to the M.I.C.?

There will be minimal ongoing costs. Each year the M.I.C. is required to produce audited financial statements. This cost is estimated at $30,000.00. There will also be some ongoing legal costs, website development and hosting costs and other minor expenses. It is anticipated that these costs will not be significant. Past that we expect only minor stationary expenses.

7/ Is my investment RRSP eligible?

Yes it is!

 8/ Can I re-invest my dividends into the M.I.C.?

Yes you can however you must still declare the dividend on your annual tax return.

 Note: The Permanent Investment Corporation is the Manager of The Permanent Mortgage Investment Corporation.  For more information please refer to the Offering Memorandum of The Permanent Mortgage Investment Corporation, which may be obtained from the Manager, including the risk factors described therein.