Quick Answer
To get a private mortgage in Canada, apply with a non-bank lender that evaluates your property equity, loan-to-value ratio, and repayment plan rather than relying mainly on bank-style income and credit rules. Review available residential private mortgage options before applying. Private mortgages can provide fast short-term financing, but the higher cost and firm maturity date make a documented exit strategy essential.
Introduction
A private mortgage in Canada can help homeowners, entrepreneurs, and self-employed borrowers access equity after a bank decline or renewal problem. Instead of using rigid debt-service calculations as the main test, a private lender reviews the property, existing debt, requested loan amount, and the plan for paying out the mortgage at term end. This makes a private residential mortgage useful for time-sensitive refinancing, second mortgages, and bridge financing, but it is not a replacement for long-term conventional financing. The loan is secured by real estate, so failing to repay can put the property at risk.
Key Takeaways:
Equity and a realistic exit strategy drive private mortgage approval.
Private terms are shorter and usually cost more than bank mortgages.
Clear documentation prevents delays, surprises, and unsuitable borrowing.
How a Private Mortgage in Canada Works
A private mortgage is a loan registered against a home or other property and funded outside a traditional chartered bank. The lender may be a private individual, a mortgage investment corporation, or an alternative lending business, and the decision centres on the security behind the loan and the repayment route. Ontario's financial regulator (FSRA) notes that private mortgages are typically short-term, higher-cost arrangements, which is why lender fees and exit timing deserve as much attention as the headline rate. For a clear foundation, review how private mortgages work before committing to a term.
Start with the property, equity, and purpose
Private lenders first need to understand the property value, all existing mortgages or liens, the amount requested, and why the funds are needed. This approach can help with a private mortgage for self-employed borrowers whose income is legitimate but difficult to document in a conventional format, as well as borrowers rebuilding credit. A lender will still assess risk carefully because the property is the security.
Property value: An appraisal supports the lending decision.
Existing debt: Registered mortgages affect available equity.
Loan purpose: Refinancing and urgent obligations require clear context.
Exit plan: Repayment must be achievable at maturity.
Prepare documents before you apply
Have identification, a mortgage statement, property tax information, proof of insurance, and documents that explain income or business revenue where relevant. Your mortgage application process should also disclose debts, liens, and recent credit events, since omissions can slow underwriting or change terms. Lenders may request an appraisal, title review, and lawyer involvement before funding.
Private Mortgage Lenders vs. Big Banks in Canada
The key difference is not that one loan is secured and the other is not, because both can be secured by real estate. The difference is underwriting: banks generally prioritize verified income, credit history, and debt-service ratios, while a private mortgage lender in Canada may place greater weight on equity, property marketability, and the borrower's plan to repay the loan. That flexibility does not eliminate the need for disclosure or affordability planning.
Compare underwriting, term length, and repayment expectations
This comparison shows why private lending is commonly used as a temporary financing tool rather than a long-term mortgage substitute. Private loans are commonly structured for a shorter period, so the payoff plan should be decided before closing.
Decision factor | Traditional bank mortgage | Private mortgage |
|---|---|---|
Main underwriting focus | Verified income, credit, and debt service | Property equity, security, and exit strategy |
Typical term information | Published guidance suggests terms often run 3 to 5 years | Published guidance suggests terms are typically 3 to 24 months |
LTV information | Product-specific and lender-specific | Typical private LTV range is commonly cited as 65% to 80% |
Principal payments | Usually part of regular payments | Published guidance suggests private mortgages are typically interest-only |
For illustration, on a property appraised at $1,000,000, a 65% to 80% private LTV range would equate to $650,000 to $800,000 in total financing, although the actual amount depends on the property, location, lien position, and lender review. For second mortgages, combined debt is often lower, with second-position LTV commonly in the 65% to 75% range.
Know what costs can change the real price
Rates, lender fees, legal costs, appraisal fees, and broker fees can all affect the total cost, so compare the full commitment rather than focusing only on the rate. Published lender fee guidance suggests first mortgages usually carry a lender fee of about 1.5%, while second mortgages can rise to 2%, with pricing generally increasing as LTV rises from under 60% toward 80%. A typical LTV range is not a guarantee of terms, especially where property type or market conditions create additional risk.
Qualifying for an Equity-Based Mortgage Loan
Qualification begins with usable equity, not just the home's headline value. As federal consumer guidance explains, home equity is the difference between a property's appraised value and the balance still owed against it, which is the same starting point a private lender will use. Subtract registered mortgages and other secured obligations from the appraised value, then consider the requested loan in relation to that remaining equity. A lender using flexible underwriting in Canada may consider credit challenges, but it still requires a credible repayment path.
Build an exit strategy before accepting the offer
An exit strategy states exactly how the private mortgage will be repaid at the end of its term: refinancing with a conventional lender, selling the property, using confirmed proceeds, or another documented source. The effective exit strategies research found that 72% of alternative mortgage borrowers had one in place in 2020, with 64% moving to a conventional lender and 8.5% selling without default or foreclosure.
Do not treat future appreciation as the only repayment plan. Private terms can mature before a borrower's credit improves, a business sale closes, or a property sells, so the exit plan should include timing, documentation, and a contingency if the first option does not occur.
Choose a lender that explains the commitment
Review payment frequency, interest calculation, fees, renewal terms, legal requirements, prepayment conditions, and default consequences before signing. Solid Capital's private mortgage options include first and second mortgages with loan-to-value ratios up to 85%, while its stated process starts with a five-minute online application and can provide funding as fast as 24 hours. Ask every question early, including questions about private mortgages that affect your ownership, payments, and exit plan.
Conclusion
A private mortgage can be a practical route to property-backed financing when a bank decline does not reflect the full strength of your equity or financial situation. Start with an accurate property value, disclose all debt, and ensure the loan amount leaves sufficient equity for the lender's risk requirements. Most importantly, document how the loan will be repaid before the short term ends. For Canadian homeowners seeking a property-secured solution with flexible underwriting, connect with Solid Capital to discuss the available mortgage options and terms.
Need a faster review of your property-backed financing options? Explore mortgage solutions from Solid Capital with a Canadian funding advisor.
Frequently Asked Questions (FAQs)
How to get a private mortgage in Canada?
Getting a private mortgage in Canada starts with submitting property, debt, identification, and income-related documents so a lender can assess equity, loan purpose, and a realistic exit strategy instead of relying exclusively on conventional bank qualification rules.
What is the difference between private lenders and big banks?
The difference between private lenders and big banks is that banks generally emphasize verified income, credit, and debt-service ratios, while private lenders place greater emphasis on real estate equity, property value, lien position, and repayment at the end of a shorter term.
Can I get a private mortgage with bad credit?
A borrower can get a private mortgage with bad credit when the property has sufficient usable equity and the lender accepts the overall risk, but poor credit can affect pricing, required documentation, and the strength of the exit strategy required.
How long does private mortgage approval take?
Private mortgage approval can move quickly when documents, appraisal information, title details, and the exit plan are ready; approval times depend on the file.
What LTV do private mortgage lenders offer?
Private mortgage lenders commonly offer loan-to-value ratios from 65% to 80%, with 75% described as a common target in stable urban markets, although some lenders may offer higher LTVs.
What are the interest rates for private mortgages in Canada?
Interest rates for private mortgages in Canada vary by equity, property type, loan position, credit profile, and exit plan; higher-LTV borrowing generally carries higher pricing.
About the Author
James Bennett is a Senior Financing Writer covering private mortgages, business financing, and alternative lending in Canada. His work focuses on translating mortgage qualification, property equity, and funding decisions into clear, practical guidance for homeowners and business owners.
