Private Mortgages in Canada: When and Why to Consider Them

Private mortgages have a reputation problem, people hear 'private lender' and picture desperation. In reality, private capital is simply the fastest, most flexible tier of Canadian lending, and used correctly it's a bridge that gets borrowers from a hard spot to a bank-quality file.

What a private mortgage is

Individuals, mortgage investment corporations (MICs) and syndicates lend their own capital secured against real estate. Approval is driven by the property and the equity, typically up to 75% loan-to-value, rather than by credit scores and income documents. Terms are short: usually 12 months, often interest-only.

What it costs

First-position private money generally runs 8-12%, seconds higher, plus lender and broker fees of roughly 2-4% combined. Yes, that's expensive, as a permanent home. As a 12-month tool that stops a power of sale, closes a deal the bank fumbled, or buys time to finish a consolidation, it's often the cheapest option actually available.

Legitimate reasons to go private

• Speed: funding in days for a closing that can't move.
• Bruised credit or unprovable income that needs a season to repair or document.
• Stopping a power of sale and protecting equity.
• CRA arrears that freeze bank approvals until they're paid.
• Unusual properties or situations A and B lenders won't touch.

The exit is everything

A private mortgage without an exit plan is how borrowers get trapped rolling 10% money year after year. Before funding, the plan should already name the exit: refinance to a B lender in 12 months once credit heals, sell in the spring, or clear the CRA balance and return to a bank. We build the exit into the file from day one, that's the difference between a bridge and a treadmill.

Protect yourself

Work through a licensed broker, insist on independent legal advice, and read the fee and renewal clauses carefully. A legitimate private deal is transparent about every dollar. If it isn't transparent, it isn't legitimate.

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