Private Mortgages
The short version
A private mortgage is funded by a mortgage investment corporation or an individual investor rather than a bank. The decision rests mainly on the property and the equity in it, not on whether your income fits a bank's template. That makes private lending useful when a file is time sensitive or unusual, such as self-employed income that looks small on paper, recent credit damage, tax arrears, a property in transition, or a closing that has to happen in days. Terms are short, usually a year, and payments are often interest only. Private money costs more than bank money and comes with lender and brokerage fees, so it is meant to solve a defined problem and then be replaced. Before arranging one we want to see the exit. Approvals are on approved credit.
Who actually uses private mortgages?
Not who most people assume. The stereotype is someone in financial trouble. In practice a large share of private borrowers are asset rich and simply do not fit a bank's checklist this year.
- Self-employed owners whose filed income understates reality. Writing off aggressively is good tax planning and poor mortgage planning. A private lender can look at the business and the property instead of only the Notice of Assessment.
- People rebuilding after a bad stretch. A consumer proposal, a separation, or a business that failed will close most bank doors for a period. Private money carries you through it.
- Buyers and owners on a deadline. A closing in a week, a tax arrears deadline, or a lender that pulled out late does not leave time for a full bank underwriting cycle.
- Unusual properties. Mixed use buildings, rural acreage, homes mid renovation and properties with title issues routinely fail prime lender guidelines while still being perfectly good security.
How does a private lender decide?
Equity first. The lender wants to know what the property is worth, how much is already owed against it, and what it would sell for if things went badly. That is why an appraisal is almost always required and why location matters so much. A property in Toronto, Mississauga, Brampton, Vaughan or Markham draws far more lender interest than the same building in a small town, and the pricing follows.
After equity comes the story. A lender will fund a messy file with a clear explanation far more readily than a tidy file with something unexplained in it. Be straightforward with us about what happened. We have seen it before, and hiding it only wastes everyone's time when the lender finds it anyway.
Third comes the exit. More on that below, because it is the part borrowers most often skip.
What does it cost?
More than a bank. There is an interest rate, a lender fee and a brokerage fee, plus the appraisal and your legal costs. The fees are usually deducted from the money advanced, so plan around the net figure rather than the face amount of the mortgage.
We do not publish rates anywhere on this site, and private pricing in particular cannot be quoted in the abstract. It moves with the equity position, the property, the location and the strength of the file. What we will do is put the full cost in writing before you commit to anything, which Ontario brokerages are required to do and which we would do regardless.
Why the exit plan matters more than the rate
A private mortgage is a bridge to somewhere. If you know where, the higher cost is usually worth paying for a year. If you do not, you are renting money at a premium and the problem will still be there in twelve months, only larger.
Workable exits look like this. Credit recovers enough to qualify with a B lender at renewal. Two years of filed business income finally support a prime application. The property sells. A renovation completes and the refinanced value supports a normal mortgage. Arrears are cleared and the file returns to a bank.
If none of those apply, the right advice may be to sell rather than borrow. We would rather tell you that now than arrange a loan that buys you a year and costs you the equity.
How Ontario regulates this
Private mortgages are arranged through licensed mortgage brokerages under the Financial Services Regulatory Authority of Ontario. The brokerage must disclose the lender, the full cost of borrowing and any fees to you in writing before you sign. If you are ever offered private financing without that paperwork, walk away.
Every mortgage we arrange goes through BRX Mortgage Inc., FSRA brokerage licence 13463, and the disclosure comes with it as a matter of course.
What we do differently
We treat private lending as a last resort rather than a first option, which is not how every brokerage handles it. If a bank, credit union, monoline or B lender will take your file, that is where it goes, because it will cost you less. We only move to private money when the alternatives have genuinely been exhausted or the timeline leaves no choice.
When we do arrange it, we plan the way out at the same time. You should leave the first conversation knowing not just what this costs, but what has to be true in twelve months for you to be somewhere better. Start with a pre-approval conversation if you are not sure which side of the line you fall on, or send us the details and we will look at it.
Common questions
Who lends private mortgage money in Ontario?
Mortgage investment corporations, which pool money from investors, and individual private lenders who lend their own capital through a licensed brokerage. Both are regulated in how they deal with you through the brokerage, and both must be disclosed to you in writing.
Do private lenders check my credit?
They look, but it is not the deciding factor. The property and the equity in it carry the decision. Credit and income tell the lender how likely you are to keep up payments and how realistic your exit plan is.
How long is a private mortgage term?
Usually one year, sometimes two. They are built to be temporary. Payments are often interest only, which keeps the monthly cost down while you work on whatever needs fixing.
What fees come with a private mortgage?
A lender fee, a brokerage fee, an appraisal and legal costs. They are normally netted out of the advance rather than paid up front. Ontario brokerages must disclose all of it to you in writing before you commit.
Can I get out of a private mortgage early?
Most have a minimum interest period, often three months, so early payout is possible but not free. We confirm the payout terms before you sign, because the exit is the whole point of the loan.
Is a private mortgage a bad idea?
It is a tool, and like any tool it is wrong for some jobs. Used to solve a specific problem with a clear way out, it works well. Used to cover an ongoing shortfall with no plan, it makes things worse. We will tell you which one we think you are doing.