MIC Vs. Private Lending: Detailing The Differences

Individual mortgages can be a gamble when it comes to investing in the real estate market. It requires research, patience, and faith. This hassle has traditionally passed over to specially appointed private lenders. And you might be stuck wondering if there’s any alternative to this?

If yes, you’re in the right loop! The alternative comes in the form of a mortgage investment corporation (or MIC, for short).  At Versa Platinum, we strive to satisfy investors and assist borrowers by lending mortgages. Moreover, most individuals are unaware of how we do it, providing the outcomes to our investors. 

In this post, we’ll look at the definitions and explore MIC vs. private lending effectively.

Let us go!
What is Meant By 

Private Lending

When it comes to private lending, a private lender will fund a single mortgage with their capital. For instance, if you need a second mortgage against your house, a private lender lends the entire mortgage amount. In return, they will receive monthly payments from you. Moreover, a private lender will review the file with their mortgage broker to handle all the receipts, collections, and discharge statement preparations for compliance purposes.  

Mortgage Investment Corporations

On the contrary, mortgage investment corporations are provincially registered and licensed mortgage investment and lending firms. They facilitate investing in a pool of mortgages. it is shared among a pool of investors. This can be an effective alternative to traditional lending organizations like banks. MICs are known to pool your investment across every mortgage.

Is There Any Difference in Investing In A Mortgage Corporation and Private Lending?

Yes, there’s a vast difference when you invest in private lending or your mortgage investment corporations. We have discussed some of those differences below:

  • Diversification  

While lending through a MIC, your investment is spread over many mortgages. MICs diversify an investor’s capital through many mortgages to mitigate the risk of loss and provide reliable and consistent interest payments to investors. The investor’s money is not assigned to any one mortgage but to the entire pool of mortgages.

  • Issue of Idle Funds

When lending on a single mortgage (private lending), the lender personally looks out for their capital. They will have to find a new investment once that mortgage has been paid out. This can take weeks or even months; therefore, having the capital redeployed quickly is often not feasible. It can often be challenging to match the amount of funds the lender has to the borrower’s requested mortgage amount. 

  • Administrative and Collection Burden

MICs handle the sensitive collection process should borrowers miss their payments, renewals, discharges, mortgage statements, underwriting, dealing with appraisers, banking transfers within trust accounts, registered accounts funding paperwork, lawyers and mortgage brokers/agents. MICs relieve the administrative and collection duties of investors, as well as the stress that comes with it. It is often vital to accomplish all the steps diplomatically and timely to avoid all kinds of problems.

  • Experience

MICs have experienced mortgage investment managers who will carefully review all documents, review properties and borrowers, manage your investment, and help protect your interests. This is an advantage to private lending as many lenders are not experienced and may let an unfit borrower use their money and not pay it back promptly, and this could result in higher risk and sometimes in loan defaults. If you are not sure whether a Mortgage Investment Corporation is the right choice for you or not, working with Versa Platinum will help you find the best options for your specific financial situation. We will also negotiate with lenders and submit documents on your behalf. Worry not; our professionals are always there to provide you with custom solutions. We are just a few clicks away!

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