With education costs on the rise, planning for your child’s future has never been more critical. Registered Education Savings Plans (RESPs) offer an attractive way to build an education fund—especially when you consider the potential benefits of incorporating a Mortgage Investment Corporation (MIC) (MIC) into a self-directed RESP.
A MIC is a pooled investment vehicle that allows you to invest in a diversified portfolio of residential mortgages. As an income producing investment, a MIC pools capital from multiple investors to lend to borrowers in the form of first and second mortgages. MICs are an alternative lending source in Canada’s real estate market and offer investors a way to earn income through mortgage interest and fees charged to the borrowers.
MICs account for between 1% to 2% of total outstanding mortgages in Canada. They are increasingly becoming a preferred financing method for individuals with non-traditional income sources, investors requiring short-term loans, and the growing number of Canadians who do not meet the traditional banking sector’s strict lending criteria.
While a MIC may sound like a novel investment vehicle, it was first introduced in 1973 under the Mortgage Financing Act to encourage private lending and investment in Canadian real estate. MICs are provincially licensed and registered, and their shares are qualified investments under the Income Tax Act, which makes them eligible investments for registered accounts like TFSAs, RRSPs, RRIFs and RESPs.
With the cost of a four-year post-secondary education in Canada forecast to surpass $100,000 for the first time in 2025, families are under increased pressure to save effectively. By incorporating a MIC into a self-direct RESP early, families can better prepare to cover tuition and other expenses when the time comes.
Understanding RESP Plans
An RESP is a tax-sheltered savings plan specifically designed to help you save for a child’s post-secondary education. Although contributions are not tax-deductible, investments made in a RESP grow tax-free until the funds are withdrawn for educational purposes. Unlike the TFSA or RRSP, a RESP has no annual contribution limit. However, there is a lifetime contribution limit per child of $50,000. This limit applies only to the amount that can be invested in an RESP, not the total value of funds.
To encourage RESP contributions, the Canadian government matches 20% of contributions, up to $500 per year per child, under the Canada Education Savings Grant (CESG). The lifetime maximum CESG contribution is $7,200 per child. Children are eligible to receive the CESG up to the end of the calendar year they turn 17. Government matching could provide a critical boost to your RESP, essentially providing free money to help you save faster for a child’s education. Like other RESP contributions, CESG amounts grow tax free until the funds are withdrawn for education expenses.
One of the biggest benefits of a RESP is the inherent flexibility it provides. By starting early, families have many years to save for a child’s education, providing ample time to grow the fund. When the funds are eventually withdrawn for education expenses, the student, and not the contributor(s), is taxed. Since full-time students often have little to no income, this often results in a negligible tax burden.
Self-Directed RESP Plans
For investors seeking more control over their investments, self-directed RESP plans allow you to choose from a variety of investment options—including MICs. A self-directed RESP offers investors greater flexibility and control over their investment decisions. This flexibility means you can tailor your portfolio to your risk tolerance and investment goals, potentially optimizing returns over the long term. Depending on the investments included in the RESP, self-directed plans can potentially carry lower fees than group RESP plans.
With group plans, contributions are pooled with other investors, investments are controlled by the plan provider, withdrawals are less flexible, and there may be fees or penalties if the beneficiary does not end up pursuing post-secondary education.
For investors considering MIC investing, a self-directed RESP is the way forward.
MICs vs. GICs and Balanced Funds
By including a mortgage investment in your RESP, you have the potential to significantly enhance your savings over time. This becomes more apparent when comparing the potential returns of a MIC and traditional investments like Guaranteed Investment Certificates (GICs) and Balanced Mutual Funds, which are mutual funds that typically invest in a blend of stocks and bonds.
Although GICs offer safety and predictable returns, they have historically provided much lower yields compared to a leading Mortgage Investment Corporation. For example, typical GIC rates in 2025 are roughly 3%. By contrast, the CMI MIC Funds target annual yields of between 6% and 11%, depending on the fund.
Balanced Funds have historically provided a good mix of growth and income, but they come with moderate risk, especially against the current macroeconomic backdrop of a US-led trade war, a strengthening U.S. dollar, weak economic growth and volatile stock markets.
By adding a MIC to your RESP, you could access competitive returns through a diversified mortgage portfolio, particularly if you reinvest your distributions back into the fund This can be accomplished by enrolling in an automatic dividend reinvestment plan, or DRIP. Over a 15-year period, the effect of compounding interest in a MIC-focused strategy might outperform more traditional options, especially in a rising rate environment.
For example, if you contribute $2,500 annually to the CMI MIC Balanced Mortgage Fund and the government’s CESG adds $500, the total amount invested annually is $3,000. The CMI MIC Balanced Mortgage Fund has historically achieved an annual yield of about 8%. These contributions compounded over 15 years could grow to more than $85,000. This MIC-focused strategy could potentially outperform more traditional strategies comprised of GICs and Balanced Funds, especially in a volatile market environment.
When combined with traditional assets, a mortgage investment can be a smart way to build a strategically diversified RESP portfolio. The unique structure of MICs, combined with the benefits of government matching (CESG) and tax-sheltered growth, can make mortgage investments an appealing choice for self-directed RESP investors.
Investment Limits and the Value of Advice
MICs offer the ability to start investing with as little as $5,000, making them an attractive and accessible option for a broad range of investors, particularly those looking to diversify their portfolios with smaller allocations.
Private MICs, like CMI’s, are classified as exempt market investments and do not trade on a public exchange. The exempt market carries investment limits for individuals investing on their own, with three categories of investors, based on income and asset levels:
Accredited investors have no investment limits. To qualify for this category, an individual must have an annual income exceeding $200,000 individually or $300,000 combined with a spouse. An individual can also qualify by having over $5 million in net assets or $1 million in financial assets, either alone or with a spouse
Eligible investors can invest up to $100,000 in exempt market securities within a 12-month period. To qualify, they must have net income before taxes of at least $75,000 in the past two years (or at least $125,000 combined with a spouse), or net assets of at least $400,000, either alone or with a spouse.
Non-eligible investors are those who do not meet these income or asset requirements and are limited to investing just $10,000 each year in exempt market securities.
Investing through a registered advisor can significantly increase the amount investors are able to invest in MICs. Non-eligible investors who work with an advisor can qualify as eligible investors, allowing them to invest up to $100,000 per year in MICs, unlocking greater opportunities for diversification and portfolio growth.
Conclusion
As MICs continue to play a crucial role in Canada’s mortgage market, investors are in a prime position to benefit from the opportunity to earn high-yield passive income. A MIC has accessible investment minimums, offers diverse investment options and can be incorporated easily into an RESP. For self-directed investors, a mortgage investment through a MIC can potentially help you reach your child’s education savings goal faster – and with less volatility along the way.
CMI Financial Group is one of Canada’s largest MIC providers. With more than $1 billion in assets under management, our mortgage investment solutions have helped investors access high-yield investment opportunities suited to their risk and return objectives. Since our inception, we have facilitated more than $3 billion in successful mortgage placements across Canada.
To learn more about how CMI MIC Funds can help boost your RESP savings goal, contact one our investment professionals for a free consultation.
