Frequently Asked Questions
A mortgage investment corporation or MIC is an investment and lending company designed specifically for mortgage lending in Canada.
Owning shares in a mortgage investment corporation enables you to invest in a company which manages a diversified and secured pool of mortgages. Shares of a MIC are qualified investments under the Income Tax Act (Canada) for RRSPs, RRIFs, TFSAs, or RESPs. Profits generated by MICs are distributed to its shareholders according to their proportional interest. The mortgages are secured on real property, often in conjunction with other forms of security such as: personal and corporate guarantees, general security agreements, and assignments of material contracts (ie. insurance policies prepared by lawyers for the MIC).
There are a number of advantages in mortgage investment corporations:
First of all, Ginkgo share values do not fluctuate in response to market forces like publicly traded stocks or mutual fund unit values. Unless Ginkgo MIC experiences an operating loss, the share values are always equivalent to the share issue price. This is because of the Income Tax Act (ITA) rule requiring 100% of a MIC's net income to be paid out to the shareholders by way of an annual dividend.
Secondly, Ginkgo MIC share values are a function of the quality of the Company's mortgage portfolio. Real estate values tend to be much less volatile than stock and bond prices. Even if the borrower defaults, the mortgage investor is protected by collateral that is stable and immoveable.
In addition, Ginkgo's mortgage portfolio is considered to be stable for a number of reasons:
- Almost all of the real estate security is residential, comprised of single family, owner-occupied homes
- The maximum loan-to-value for a loan is 85% and the total loan-to-value is frequently below 80%
- Lending is diversified across the provinces
- Highly trained and experienced underwriters and management
This is a good question. A Ponzi scheme does not have a real business. It is a fraudulent investment operation that pays returns to its investors from the investor's own money or the money paid by subsequent investors, rather than from profit earned by the company's operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.
Ginkgo is not a Ponzi scheme, as we run a solid business providing mortgages to clients. We generate real income from the collected interest of the mortgages, and distribute that interest to investors. In short, Ginkgo MIC has legitmate and profitable financial products, and therefore does not need to use any new investors' money to pay our existing investors. In addition, Ginkgo MIC is registered with Financial Services Commission of Ontario (FSCO) under the license number 12157 and is subject to an annual audit by an independent auditor.
As an investor with Ginkgo MIC, you are entitled to attend the Annual General meeting, and will receive monthly reports regarding your investment and details about the overall performance of the company.
Our business model is very similar to banks - we invest in (lend out) mortgages and collect monthly interest to pay our investors. However, Ginkgo MIC is different from banks in that we mainly lend out second mortgages; therefore, we can charge a higher interest rate and in turn give investors a higher dividend. On average, our mortgage rates range from 12% to 16% and allow investors to earn 5-9% in dividends. See Ginkgo's loan portfolio
Ginkgo typically invests in small second mortgages on residential properties. Every investment is based on a thorough investigation of the property, which includes, of course, a certified appraisal. A loan normally does not exceed 85% of the current value of the property to ensure that the initial investment will not diminish in the face of a drop in property price or other negative economic factors.
The main difference between a first and second mortgage is debt seniority.
In the event of a default, both first and second mortgagees have the right to foreclose on the property and sell it on the market for repayment. However, the first mortgagee is at the first position to get the proceeds; and the second mortgagee will be entitled to the remaining amount. Since second mortgages are behind the first mortgage, they are considered more risky and therefore demand a higher return.
In today's market, first mortgage interest rates often ranged from 3-5%, while second mortgage interest rates can range from 12-16%. Since we specialize in higher rate second mortgages, we can provide our investors with higher returns.
The minimum amount is $10,000, and will require the investor to have an Eligible Investor Certificate. Investors who choose to invest over $100,000 will require an Accredited Investor Certificate. Both certificates can be completed with your Exempt Market Dealer (EMD). An appointment with an EMD can also be made through us by calling us at 1-855-901-5133.
Just like a bank, we will issue a monthly report to you via e-mail to inform you of your investment's perfomance and standing.
You will also be invited to our Annual General Meeting, so you can have a better understanding of the company's performance. It is a great opportunity to also meet the staff who manage your investments, and be informed of projected economic outlooks. Therefore it is very important to provide up-to-date contact information in which we can inform you about your investment. Your personal information is held privately, only used for the regular performance of the corporation. It will not be sold to third parties.