High-rate, asset-based lending as a last resort — or a smart bridge strategy.
Private mortgage lenders are the third tier of Canada's mortgage market. They lend based primarily on the property's value rather than your income or credit score. The cost is high — but for certain situations, they offer financing that no bank or B lender will provide.
What Is a Private Mortgage Lender?
A private mortgage lender is an individual investor or a mortgage investment corporation (MIC) that provides mortgages outside the traditional banking system. They are not federally regulated in the same way as banks and trust companies, which gives them much more flexibility in who they'll lend to — and allows them to charge accordingly higher rates.
Types of Private Mortgage Lenders
Individual private lenders: Wealthy individuals who invest their own capital. May offer flexible terms and negotiate directly.
Mortgage Investment Corporations (MICs): Pooled investment vehicles that lend to non-prime borrowers. Often managed by mortgage companies. More systematic in their underwriting.
Mortgage Funds: Similar to MICs but structured differently for investor tax treatment. Operate in most major markets.
Private Mortgage Rates and Terms (2025)
Feature
Typical Range
Interest rate
8%–14%+ per year
Lender fee
1%–3% of mortgage
Broker fee
1%–2% of mortgage
Term length
6 months – 2 years
Maximum LTV
65%–75% of property value
Amortization
Often interest-only or short amortization
When Do Private Lenders Make Sense?
Credit score is too low for B lenders (below 500–550)
Very recent bankruptcy or consumer proposal (not yet 2 years post-discharge)
Need quick financing that banks can't provide in time
Property type rejected by banks (rural, acreage, unusual commercial/residential mix)
Bridge loan between buying and selling
Construction financing for non-standard projects
Consolidating high-interest debts using home equity when banks decline
The Bridge Strategy: Use a 1-year private mortgage to buy time, rebuild credit, and arrange proper financing. Then refinance with a B or A lender at the 1-year mark. Many Canadians use this as a planned strategy — not a permanent state.
The Real Cost of Private Lending
Consider a $400,000 private mortgage at 11%:
Lender fee (2%): $8,000 paid at closing
Broker fee (1.5%): $6,000 paid at closing
Monthly interest (interest-only): $3,667/month
Total cost for 12 months: ~$58,000
That's expensive — but if it allows you to consolidate $50,000 in 28% credit card debt, the math may still work in your favour.
Warning Signs of Predatory Private Lenders:
Pressure to sign quickly with no time to review
Fees that aren't disclosed upfront
Terms designed to force you to renew (no exit strategy)
No clear explanation of penalties for early exit
Always use a licensed mortgage broker and have a real estate lawyer review the mortgage documents before signing.
How to Access Private Lenders
Private lenders almost exclusively work through licensed mortgage brokers. A broker will match your situation to appropriate private lending sources and negotiate terms. Never approach a private lender directly without professional help — the risks of misunderstanding terms or encountering predatory practices are significant.
Getting Out of a Private Mortgage
Have an exit strategy before you take a private mortgage. Common paths out:
Rebuild credit over 12–24 months and refinance at a B or A lender
Sell the property and pay off the private mortgage
Receive inheritance or other funds and pay down the balance
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