Mortgage Investing and Traditional Fixed Income: Understanding the Differences
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Canada’s fixed-income market has expanded beyond traditional tools like government and corporate bonds to mortgage investing.
Mortgage investing involves direct borrowing from a mortgage investment corporation, It features direct, flexible negotiation between borrowers and lenders whereas traditional fixed income relies on government and corporate bonds. It operates in public markets through bonds and securities issued by established companies, offering transparent pricing. Both offer capital preservation and equity diversification.
Key Differences
Liquidity
Mortgage investments have low liquidity due to locked funds and are fixed or floating. Traditional fixed income offers high liquidity across various public bond structures. It can vary in structure, liquidity, and credit quality.
Returns and Risk
Private investments must be held until maturity and carry higher risk from elevated LTVs and private borrowers, compared to lower-risk traditional fixed income.
Interest Rate Sensitivity
Fixed-rate bond prices generally fall when market interest rates rise. Mortgage loans may carry fixed or floating rates and shorter terms can create opportunities to reset pricing when loans are renewed or replaced.
MIC investor redemption rights depend on applicable share terms, rather than loan maturities or real estate sale timelines. Share terms outline specific redemption schedules, notice periods, liquidity reserves, and potential limits or gates to maintain fund stability.
Both assets complement portfolios: traditional fixed income provides liquidity and stability, while private debt enhances yield and diversification. Choosing between them depends on illiquidity tolerance, cash flow needs, and due diligence capacity.
For information only; not an offer to sell securities or investment advice. MIC investments involve risk, including possible loss of capital, and are not guaranteed. Mortgage security does not guarantee recovery. Short mortgage terms do not ensure investor liquidity; redemptions are subject to the applicable share terms and restrictions. Investment availability is subject to eligibility and applicable securities laws. Review the relevant offering documents before investing.
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