The Canadian Investor Why Private Mortgages Can Trap Investors for Years
Dec 25, 2025
Dan Foch, a real estate and private lending expert, joins to explain the complex world of private mortgages, from MICs to syndicated mortgages. They reveal how these investments promise high yields while hiding significant fees and liquidity risks. Dan emphasizes the difference between first and second-position lending and delves into the dangers of gated redemptions and conflicts of interest. Investors are urged to conduct thorough due diligence, asking critical questions to avoid being trapped in unfavorable financial situations.
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Fees Hide The Real Cost And Manager Payouts
- Private mortgage rates appear high but the fee structure hides true economics because lender and broker fees often get added to principal.
- Funds distribute most loan interest to investors while managers earn revenue from origination and other deal fees.
Prefer First-Position, Low LTV Lending
- If investing in MICs, prefer managers that lend only in first position and maintain conservative loan-to-value limits.
- Ask for fund declaration limits and focus on funds prioritizing lower leverage and first-position lending.
Tax Flow-Through Explains MIC Distributions
- MICs make distributions taxable as interest to investors because they avoid corporate tax via flow-through rules under the Income Tax Act.
- That tax treatment doesn't imply safety — it's just a structural feature of the vehicle.