A private mortgage is short-term financing provided by an individual lender, a group of investors, or a mortgage corporation. Unlike banks, private lenders do not rely solely on credit scores for an approval, income history, or traditional underwriting. They focus on property equity, and the borrower’s exit strategy, along with the overall risk.

Private mortgages are commonly used by borrowers who need fast approval, have non-traditional income, are dealing with arrears or collections, or require a temporary financing solution until they can qualify again with an A or B lender again.

There are three types of private lenders in Ontario:

• Individual Lenders

• • A single investor lending their own funds.
  • Pros: Often the most flexible.
  • Cons: Rates may vary widely depending on the individual’s risk tolerance.
    
    

• Syndicate Lenders

• • This involves two or more investors pooling funds to finance mortgages.
  • Pros: More capital available, more consistent underwriting.
  • Cons: May have slightly higher fees due to shared risk.
    
    

• Mortgage Corporations / MICs

• • Licensed mortgage investment corporations lending large amounts.
  • Pros: Structured guidelines, predictable decisions, strong funding capacity.
  • Cons: Slightly stricter criteria than individual lenders.

All three are regulated under Ontario’s mortgage rules and require lawyer representation for both borrower and lender to protect all parties, and private mortgages are ONLY allowed to be offered by either a Licesened Level 2 Mortgage Agent, or Mortgage Broker. Bank employees are NOT permitted to offer clients one as they're not licesened, and NO Bank Employees are legally allowed to charge any "mortgage application fee" or a "lender or broker fee" Only Mortgage Brokerages are permited to charge a Brokerage Fee which is to be paid only to the brokerage and not any of the agents or brokers of the brokerage.

Private mortgages are usually short-term, not long-term commitments. Most lenders offer terms as short as 3 months, and generally between 6 months and 2 years, giving you time to stabilize income, repair credit, or complete renovations, or finalize a divorce, or dealing with the CRA.

You always have the option to refinance early with another lender once you qualify. There is no long multi-year lock-in period like a bank, and repayment strategies can be structured around your future goals as many privates offer fully open term mortgages, and hybrid closed terms that are open after 3, 6, or 12-months.

Key points:

• Typical terms: 6 months, 12 months, or 24 months
• Early refinance is allowed (may have a 3-month interest penalty depending on lender)
• Designed to give flexibility while solving urgent issues
• Many lenders offer Open and Closed Terms, as well as hybrid mixed terms 

People choose private mortgages because they solve problems that banks can’t. Common reasons include:

• Income outside the box: Business owners, subcontractors, gig workers, and self-employed clients may not qualify under strict bank ratios. Private lenders rely on equity, not tax returns.
• Recent credit events: Collections, CRA arrears, consumer proposals, late payments, or past bankruptcies can prevent bank approval, but private lenders can still lend.
• Urgent timelines: Fast closings, Power of Sale notices, or time-sensitive purchases may require approval in hours, not weeks.
• Property issues: Mixed-use, rural, incomplete, or unique homes may not meet bank lending guidelines.
• Construction Projects: It is  very rare that a bank will fund a small to medium sized investor for a construction project for a home, or a renovation job at your home. This is a very common use case for a private lender and where they'll step in.

A private mortgage gives you time, stability, and breathing room until you can transition back to a lower-cost lender.

A private mortgage works by lending against the equity in your property, not your just your credit or income. Approvals are generally based on loan-to-value (LTV), typically these lenders will lend up to 75%, and on rare occasions up to 80% LTV, location plays a large key into approvals, and the strength of your exit plan.

Here’s how the process works:

1. Step 1: Application Review
2. 1. We collect property details, recent mortgage statements, arrears information, and your plan for repayment.
3. Step 2: Property Valuation
4. 1. Most lenders require an appraisal or automated valuation to determine current equity and marketability.
5. Step 3: Offer & Terms
6. 1. If approved, you receive terms that outline the rate, lender fee, legal costs, and repayment structure (usually interest-only).
7. Step 4: Legal Signing & Funding
8. 1. Your lawyer signs documents, and funds are released—often within 3 to 5 business days.

Private mortgages are structured as short-term solutions to help you stabilize your finances before returning to a traditional lender.

Alternative lenders, also called non-prime or B-lenders, offer solutions that sit between traditional banks and private lenders. These include lenders such as; Home Trust, EQ Bank, Community Trust, IC Savings, DUCA, and many credit unions. They provide excellent options when you need flexibility, but don’t want the higher cost of a private mortgage.

These lenders will consider bruised credit, higher debt ratios, self-employed income, multiple rental properties, and unique situations that banks typically decline. They also offer products such as Home Equity Lines of Credit (HELOCs), Equity Line Visa's (ELVs), and open 2nd mortgages that provide revolving access to funds without the high carrying cost of private lender financing.

Key advantages:

• Lower rates and fees compared to private lenders
• Fully open HELOC or ELV options, allowing flexible repayment or use for reinvestment
• • Rates that are tied to the Banks Prime Rates, and Lower Fixed Rates than privates
• Large credit limits, often up to $1,000,000 for qualified equity positions
• More favourable long-term solutions for investors and homeowners needing ongoing access to capital

Important notes:

• Funding with alternative lenders is not fast. Unlike private lenders, they typically require full documentation, appraisals, income review, and underwriting. Which is not as restrictive as that of one of the big 6 banks.
• Typical timelines range from 4 to 6 weeks, depending on the lender and property.
• They are an excellent option when time allows, but may not work for urgent situations like Power of Sale or immediate arrears.

For many clients, we use private lending only as a short-term bridge, then transition into one of these alternative lenders to secure radically lower rates and long-term stability.