A private mortgage in Canada typically runs 12 to 24 months. That timeline is intentional. Private lenders price for short-term risk, and the expectation from day one is that the borrower will exit: refinance, sell, or transition to a conventional or B lender once their situation improves. What surprises many homeowners is how few of them actually plan that exit before signing.
The exit strategy is not an afterthought. In many cases, the cost difference between exiting cleanly at month 12 and rolling over at renewed private rates for another year runs into thousands of dollars. This guide covers every realistic option available to Canadian borrowers in 2026, what each path requires to qualify, and how to make sure you are not paying private rates longer than necessary.
Why your exit window matters more than your entry rate
Private mortgage rates in Canada run higher than A-lender rates because private lenders take on risk that banks won't touch. That premium is the price of access. The problem comes when borrowers stop thinking of the private mortgage as temporary and start treating it like a long-term arrangement.
A borrower who enters a private mortgage at 10% and renews twice without a plan will pay meaningfully more over three years than one who entered the same mortgage and refinanced to a B lender at month 14. The math is not complicated. What gets skipped is the planning.
Plan your exit before you sign. Find out what the prepayment penalty looks like, what the renewal terms are, and what could push the rate higher at renewal. Then build your exit target into a calendar and identify which qualification gap to close before the term ends: credit score, income documentation, or loan-to-value ratio. Those three variables govern almost every exit path available to you.
Under OSFI guidelines, federally regulated lenders assess borrowers against the mortgage stress test. Private lenders operate outside that framework. Transitioning from a private mortgage to a bank product means qualifying at the greater of 5.25% or your new contract rate plus 2%. That bar is achievable for many borrowers within 12 to 18 months when the preparation starts early.
Your four main exit options
Most Canadian private mortgage borrowers have four realistic paths out. Each suits a different financial situation. The right choice depends on how much your position has improved since you entered the private mortgage.
Option 1: Refinance with a B lender
B lenders, also called alternative or near-prime lenders, are the most common first stop after a private mortgage. They accept lower credit scores, self-employed income, and non-traditional income documentation. They are regulated provincially in most cases, so the federal stress test does not always apply. Most borrowers who entered a private mortgage due to a recent credit event, an employment gap, or inconsistent income can transition to a B lender within one to two terms if they address the underlying issue.
Option 2: Refinance with an A lender (bank or credit union)
If your credit has recovered and your income is provable on standard documentation (T4, Notice of Assessment, or pay stubs), an A lender offers the lowest ongoing rate. This path requires passing the OSFI stress test and meeting the lender's debt service ratio requirements. Gross debt service ratios above 39% and total debt service ratios above 44% are common cut-offs. It is a higher bar, but the rate difference over a five-year term is significant.
Option 3: Sell the property
If the property has appreciated or refinancing remains out of reach, selling is a clean resolution. The private mortgage discharges from the sale proceeds. This path works particularly well for borrowers who entered a private mortgage as a bridge during a separation, estate settlement, or distressed purchase. It is not a failure. For some files, selling is the most financially sound decision available.
Option 4: Renew with the private lender
Renewal buys time. Most private lenders will renew at term end, typically for 6 to 12 months. Use that window strategically: clear outstanding collections, build credit history, or assemble the income documentation a B lender will require. Renewing without a plan just delays the same conversation by a year at a higher cost.
| Exit path | Minimum credit (approx.) | Income documentation | Typical timeline | Rate outcome |
|---|---|---|---|---|
| A lender (bank) | 650+ | T4 / NOA / pay stubs | 3 to 6 weeks | Lowest |
| B lender | 550 to 600+ | Bank statements accepted | 5 to 10 business days | Mid-range |
| Sell property | N/A | N/A | Standard real estate timeline | N/A (discharge) |
| Renew private | N/A | N/A | Immediate | Highest (same or higher) |
The table above is a starting point, not a ceiling. Your specific LTV, property type, and province will shift these numbers. Get actual quotes before assuming one path is closed.
How to qualify for refinancing out of a private mortgage
Qualifying for a B lender or A lender refinance after a private mortgage comes down to three variables. Address all three, and the path opens. Leave one unresolved, and you will likely hear the same answer you got from the bank the first time.
Credit score and credit history
A consumer credit score from Equifax Canada or TransUnion Canada is one of the first things a B lender pulls. The minimum threshold sits around 550 to 600 for most B lenders, though some accept lower with compensating factors. More important than the score itself is the absence of recent negative events: collections, consumer proposals, or missed payments in the last 12 to 24 months all signal elevated risk. If a credit event is what put you in a private mortgage, give yourself 12 to 18 months of clean repayment history before applying to a B lender.
Loan-to-value ratio
Loan-to-value (LTV) ratio is the mortgage balance divided by the property's current appraised value. B lenders typically cap at 80% LTV for refinances. A lenders are more conservative. If property values in your area have risen since you entered the private mortgage, your LTV may have improved with no principal paydown at all. Get a current appraisal early in your planning process. It changes the math significantly in many cases.
Income documentation
This is where self-employed borrowers hit the most friction. B lenders generally accept 12 to 24 months of business bank statements, stated income with verification, or a combination of Notice of Assessment filings and revenue records. A lenders require standard employment documentation. If your income comes from multiple sources or varies month to month, work with a mortgage broker who understands alternative documentation before you apply. A declined application from a B lender does not help your file.
Honestly, if your property has equity, your income is verifiable, and your payments have been clean for 12 months, there is a real refinancing path available to you. The rate gap between private and B lender financing is too large to ignore.
What to do if you cannot exit on schedule
Not every private mortgage exit goes according to plan. Credit repairs take longer than expected. An A lender declines at the stress test. The property appraises lower than anticipated. Here is what to do when the timeline slips.
Request a renewal, not an extension
There is a difference. A renewal resets the term on new paperwork and documents the rate in writing. An extension is informal and may not reflect the updated market rate environment. Always get renewal terms in writing and review the rate, fees, and any new conditions before signing. A private lender raising the rate at renewal is opening a negotiation, not announcing a fixed outcome.
Address the blocking issue directly
A B lender declined because of a collection on your credit report? Dispute it or pay it out. LTV too high? Look at whether accelerated principal payments during the renewal term would change the calculation. Income documentation incomplete? Connect with a bookkeeper or accountant who works with alternative mortgage files. Every blocking issue has a specific resolution path. None of them fix themselves.
Work with a lender who reads the full file
Some borrowers cycle through private mortgage renewals because every lender they approach uses the same narrow criteria. A lender willing to read bank statements, revenue history, and the full context of your file may see a path that automated systems missed. That is a real difference in how underwriting works.
With equity in the property and consistent income, nobody should be stuck in a private mortgage renewal cycle indefinitely. The situation usually has a solution. It just requires the right lender.
Solid Capital is a Canadian alternative lender that reviews every file personally. If you have been stuck in a private mortgage renewal and want to understand your options, talk to a Solid Capital advisor. Five-minute application, no impact to your credit to apply. You can also read more about how our process works, explore our business financing options, or apply directly at solidcapital.ca.
The bank looks at one number. We look at the whole file. There is a difference.
Frequently Asked Questions
Can I refinance out of a private mortgage before the term ends?
Yes, but you will typically owe a prepayment penalty to the private lender. Most private mortgage agreements in Canada include a three-month interest penalty for early exit. Factor this cost into your refinancing math before committing to a new lender. In many cases, the savings from a lower rate still outweigh the penalty.
What credit score do I need to refinance a private mortgage with a B lender in Canada?
Most B lenders in Canada require a minimum credit score in the range of 550 to 600, though individual lenders set their own thresholds. Your loan-to-value ratio, income documentation, and property type all factor into approval as well. A strong LTV can compensate for a weaker credit score in many cases.
How long does it take to exit a private mortgage in Canada?
The timeline depends on your exit path. Refinancing with a B lender or alternative lender can close in as little as 5 to 10 business days. Transitioning to an A lender such as a bank or credit union typically takes 3 to 6 weeks due to underwriting requirements. Selling the property follows standard real estate timelines in your market.
What happens if I cannot exit a private mortgage when the term ends?
Most private lenders will offer a renewal at the end of term, typically at the same or slightly higher rate. This buys you more time, but it is rarely the cheapest option long-term. Use any renewal period to actively fix the issue that blocked your original exit: credit, loan-to-value ratio, or income documentation.
Does the OSFI mortgage stress test apply when I refinance out of a private mortgage?
Yes, if you are refinancing with a federally regulated lender such as a bank, the OSFI mortgage stress test applies. You must qualify at the greater of 5.25% or your contract rate plus 2%. Private lenders and many B lenders are provincially regulated and are not subject to the federal stress test, which is one reason a B lender is often the intermediate step between private and bank financing.
