A homeowner in Barrie, Ontario had roughly $290,000 of equity sitting in a house appraised at $780,000, and still got turned down for a second mortgage. The equity was real. The problem was where it sat, and how much of it the first mortgage had already claimed.
Here is the short answer. Most private lenders in Canada want the combined balance of every mortgage on a property to stay somewhere around 75% to 80% of its appraised value in a major urban market, and closer to 65% to 70% in smaller centres and rural areas. That combined figure is called loan to value, or LTV. It decides whether a private mortgage is possible before anyone looks at your income or your credit file.
So the useful question isn't how much equity you have. It's how much of it is still unspoken for once everything registered against your title is counted, and whether the property is the kind a lender could sell quickly if it ever came to that. Both parts are below, along with the math you can run yourself tonight.
How much equity private lenders actually want
Equity is what's left when you subtract everything registered against your property from what the property is worth. Private lenders rarely think about that number in dollars. They flip it around and ask how much of the home is already borrowed against, as a percentage.
That percentage is loan to value. A house appraised at $700,000 with a $420,000 first mortgage sits at 60% LTV. Add a $70,000 second mortgage and the combined figure climbs to 70%. Most private lenders in Canada work inside bands that look roughly like this:
| Property and market | Combined LTV most private lenders work within | What that allows on a $700,000 home |
|---|---|---|
| Detached home, major urban market | Around 75% to 80% | Roughly $525,000 to $560,000 of total mortgage debt |
| Condo or townhouse, urban | Around 70% to 75% | Roughly $490,000 to $525,000 |
| Home in a smaller city or town | Around 65% to 75% | Roughly $455,000 to $525,000 |
| Rural property or acreage | Around 60% to 70% | Roughly $420,000 to $490,000 |
| Raw land | Often 50% or lower | Roughly $350,000 or less |
Treat those bands as starting points rather than promises. Every lender sets its own limits, and a thin file in a slow market can land tighter than a strong file in a busy one.
Why your position on title matters as much as the percentage
A lender in first position gets paid first if the property is ever sold under power of sale. Second position takes what's left. Third takes whatever survives that. The further down the stack a lender sits, the more cushion it wants underneath, because its money is the first to vanish when a sale price comes in soft. That's why a second mortgage is almost always capped well below what a first mortgage would allow on the very same house.
Honestly, if you're holding 30% real equity in a home in a market where houses actually sell, one bank decline isn't the end of the conversation. It's the end of that conversation.
The three number equity check
You can run the same calculation a private lender runs, in about ten minutes, using three numbers. Get them right and you'll know before you apply whether your file is close.
Number one: what the property is honestly worth
Not the estimate from a listings site. Not what your neighbour got in 2022. Private lenders order an appraisal from an accredited appraiser, and whatever comes back is the number the file runs on. If recent sales on your street landed 8% below what you had in mind, the entire calculation moves with them. Pull the last three comparable sales near you before you apply, and plan around the lowest one.
Number two: everything registered against title
Add up the current balance of your first mortgage, anything drawn on a home equity line of credit, plus any second mortgage, builder's lien, judgment, property tax arrears, or a lien registered by the Canada Revenue Agency. Borrowers forget that last group constantly. A $19,000 tax lien doesn't feel like a mortgage, but on title it behaves like one, and it comes out of your borrowing room before a lender advances a dollar.
One detail on lines of credit: many lenders count the full approved limit rather than the balance you're carrying. A HELOC with a $100,000 limit and $12,000 drawn can be treated as $100,000 of debt unless the limit is reduced or the line is closed at payout.
Number three: divide, then divide again
Total registered debt divided by appraised value gives you today's LTV. Now add the amount you want to borrow and run it a second time. That second figure is the one that decides the file.
Say the appraisal lands at $640,000. Your first mortgage sits at $391,000 and there's $24,000 of property tax arrears. That's $415,000 registered, or 65%. Ask for $80,000 and the combined number becomes $495,000, or 77%. In Hamilton or Calgary that's a live file. On ten acres outside Timmins, probably not.
Notice what never entered that calculation: your credit score, your income, your reason for borrowing. Those shape your terms and they matter later, but they are a different test from the ratios a bank applies, which our guide to debt service ratios walks through. Run the equity math first. If it doesn't clear, nothing else you fix will move the file.
What moves the number up or down
Two houses with identical equity can get very different answers. The variable is how quickly, and how predictably, a lender could turn that property back into cash.
How saleable the property is
A townhouse in Mississauga with a dozen comparable sales in the last ninety days is easy to value and easy to sell. A five acre custom build on a well outside Sudbury might take nine months to move, at a price nobody can forecast with confidence. Lenders price that uncertainty as a lower LTV. The same logic applies to unusual properties: former commercial conversions, legal non-conforming units, anything where the pool of future buyers is thin.
What your exit looks like
Private mortgages are short. One and two year terms are normal, and every lender wants to know how the loan ends: a refinance back to a bank, a sale, a business transaction, a maturing investment. A borrower at 72% LTV with a credible plan to return to an A lender in eighteen months will often get further than a borrower at 65% with no plan at all. If that's the weak spot in your file, our walkthrough of private mortgage exit strategies covers the common routes.
Why bank rules push people here in the first place
Federally regulated lenders apply the mortgage stress test set out in the B-20 guideline from the Office of the Superintendent of Financial Institutions, qualifying borrowers at a rate above the one they will actually pay. A conventional mortgage also needs 20% equity to avoid default insurance through CMHC, and an insured mortgage generally can't have private financing layered behind it. Self-employed Canadians with legitimate write-downs on their returns fail these tests routinely, even while sitting on strong deposits and a paid-down home. Private lenders aren't bound by B-20. They're bound by the equity.
Who you are borrowing from
In Ontario, mortgage brokerages and administrators are licensed by the Financial Services Regulatory Authority of Ontario, and every other province has its own regulator. Ask who holds the licence on the file and confirm it. That check takes two minutes and people skip it constantly.
None of this is a judgment about how deserving a borrower is. It's arithmetic about how fast a house sells. Once you see the question that way, the LTV band you're offered usually stops feeling arbitrary.
What to do if you are short on equity
Being short by a few percentage points is fixable far more often than people assume. Five moves genuinely work.
Ask for less
The most common fix, and the least popular. If $90,000 puts you at 82% and $60,000 puts you at 77%, the smaller advance may be the only version of this deal that exists. Take it and solve the remainder another way.
Clean up title before you apply
Property tax arrears, a small judgment, an old collateral charge nobody ever discharged. Each one eats borrowing room. Some clear in a week with a phone call and a payment. Others get folded into the new mortgage, which works fine, but consumes the very room you were trying to free up.
Reconsider the position
If your first mortgage is small and near renewal, refinancing the whole thing into a single private first mortgage sometimes creates more total room than stacking a second behind it. It depends on your prepayment penalty and the numbers. Ask for both versions to be priced before you choose.
Fix what the appraiser can see
Appraisers work from what's visible and what's documented. A finished basement with permits, a new roof, a legal secondary suite: if the paperwork isn't there on inspection day, the value often isn't either. Have it ready.
Wait, when waiting is honest
Sometimes the true answer is that four more months of principal payments and a spring market carry the file across the line. A lender willing to tell you that, instead of pushing you into a structure that costs more than it solves, is the one worth staying in touch with.
Solid Capital is a Canadian alternative lender built for homeowners and business owners the big banks decline or under-serve. Rather than reading a credit score and stopping there, our advisors read the whole file: the appraised value, what's actually registered on title, your income picture, and how the loan ends. If your equity looks close and you want a straight answer on where it lands, start an application at solidcapital.ca. It takes about five minutes, there's no impact to your credit to apply, and a Canadian advisor reviews every file personally. More guides live on our blog if you'd rather read first.
Equity is the whole test at this stage. Not your score, not your story. Find the real value, subtract everything already registered against it, and you'll know exactly what kind of conversation you're walking into.
Frequently Asked Questions
How much equity do you need for a private mortgage in Canada?
Most private lenders want the combined balance of all mortgages to stay near 75% to 80% of the appraised value in major urban markets, which means keeping roughly 20% to 25% of the home as equity. In smaller centres and rural areas the requirement is usually stiffer, often 30% to 35%. Each lender sets its own limits and reads each file on its own facts.
Can you get a private mortgage with only 10% equity?
In most cases no. At 90% combined loan to value there is almost no cushion left if the property ever has to be sold, so very few private lenders in Canada will fund it. A larger first mortgage refinance, or a smaller advance that keeps you inside the usual band, is normally the more realistic route.
Do private lenders use my appraised value or what I paid for the home?
They use the current appraised value, produced by an accredited appraiser as part of the file. What you paid only carries weight if you bought recently, since a very recent purchase price is itself strong evidence of what the property is worth today.
Do property tax arrears or a CRA lien reduce my available equity?
Yes. Anything registered against title counts as debt against the property, including tax arrears, Canada Revenue Agency liens, judgments and builder's liens. They either get paid out of the new mortgage or cleared before closing, and either way they consume the equity you were planning to borrow against.
Can you get a third mortgage in Canada?
It is possible but uncommon. A third mortgage lender is last in line if the property is sold, so it usually needs a low combined loan to value, a clear exit plan, and a property in a market where homes sell quickly. Many files that reach this point are better solved by restructuring the first two mortgages instead.
Does applying for a private mortgage affect your credit score?
Applying with Solid Capital uses a soft credit check, which has no impact on your score. Later in the process a lender may run a hard inquiry, and you should be told before that happens. Ask any lender to confirm which type of check they are running and when.
