A private mortgage exit strategy is your plan for paying out a short-term private loan, usually within 6 to 12 months, before the term ends. In Canada, the three main exits are refinancing to a bank or B lender, selling the property, or renewing with your private lender while you fix whatever kept the banks away.
Most borrowers put all their energy into getting approved. Fair enough. You needed the money and the bank said no. But a private mortgage is a bridge, not a destination, and the interest-only payments that feel manageable in month two can wear thin by month ten. This guide covers how exit strategies work, the four routes Canadian borrowers actually use, and the 12-month plan for becoming bankable again.
What a private mortgage exit strategy is and why lenders ask for one
Private mortgage terms are short on purpose. Most run 6 to 12 months, often interest-only, with an option to renew. The lender is not trying to hold your mortgage for 25 years. They want to know how they get their money back, which is why nearly every private lender asks one question before funding: what is your exit?
A real exit strategy names the route, the timeline, and the trigger. "I'll refinance eventually" is not a plan. "I'll refinance with a B lender in month 10, once my 2025 taxes are filed and my credit score recovers from the consumer proposal" is a plan. The difference matters because your exit determines your true cost. A private mortgage you leave in 12 months costs far less than one you renew three times because nothing changed.
Honestly, if you don't have a written exit plan before you sign a private mortgage, you shouldn't sign it. Any lender who funds you without asking about your exit is not doing you a favour. They're planning to collect renewal fees.
Here's where borrowers get stuck: they treat the exit as a future problem. The clock starts the day you fund, not the day the renewal notice arrives. Start early. Month one, ideally.
The four exit routes Canadian borrowers actually use
Almost every successful private mortgage exit follows one of four routes. We call this the 4-Route Exit Plan, and matching the right route to your situation is most of the work.
| Route | Typical timeline | Best for | Watch out for |
|---|---|---|---|
| 1. Refinance to a bank or B lender | 6-18 months | Borrowers whose credit, income proof, or debt ratios can recover | Qualifying at the stress test rate, not your contract rate |
| 2. Sell the property | 3-9 months | Flips, estates, downsizing, or when carrying costs no longer make sense | Listing too late and being forced to accept a low offer near term end |
| 3. Renew or extend with your private lender | At term end | Borrowers who need more time and are making progress on their file | Renewal and lender fees that stack up each term |
| 4. Restructure with a second mortgage or HELOC | 6-12 months | Borrowers with a healthy first mortgage who used private funds for a specific gap | Combined loan-to-value limits across both mortgages |
Route 1 is the most common goal. A conventional mortgage from a bank, or a near-bank rate from a B lender, is where most borrowers want to land. Route 4 is the one people forget. If your private loan is a second mortgage behind a healthy first, consolidating into a new second mortgage or a HELOC at better terms can be a legitimate stepping stone. Our guide on second mortgages versus HELOCs breaks down when each one fits.
Pick your route before you fund. Then work backwards from the term end date.
How to become bankable again: the 12-month plan
If your exit is Route 1, the refinance, your job during the private term is to fix whatever made the bank decline you. Not everything. Just the specific reasons on your file. Here is the sequence that works for most borrowers.
Months 1-3: Diagnose the decline
Pull your credit reports from Equifax Canada and TransUnion. Read them line by line. Dispute errors, because they're more common than you'd think. Then write down the actual decline reasons: score, missed payments, unfiled taxes, unprovable income, or debt service ratios that ran too high.
Months 4-9: Fix the file
Pay every bill on time, without exception, because recent payment history carries real weight. Bring credit card balances below 30 percent of their limits. If you're self-employed, file outstanding returns with the Canada Revenue Agency and keep your Notices of Assessment handy, since B lenders and banks will ask for two years of them. Lower your gross debt service and total debt service ratios by paying down consumer debt, not just your mortgage.
Months 10-12: Apply before the term ends
Start refinance conversations at least 90 days before your private term matures. Remember that federally regulated lenders qualify you at the stress test rate. OSFI confirmed in January 2026 that the minimum qualifying rate stays at the higher of your contract rate plus 2 percent or the 5.25 percent floor. Budget your ratios against that number, not the rate on the offer sheet. One helpful change: since late 2024, straight switches at renewal no longer require a new stress test, provided the balance and amortization stay the same. Ask the new lender whether your move can be treated as a switch rather than a refinance. It can save a qualification headache.
Twelve months sounds long. It goes fast.
What happens if you can't exit at term end
Sometimes the plan slips. The property doesn't sell, the credit score needs another six months, or the Bank of Canada moves and the refinance math changes. What matters now is what you do in the 60 days before maturity.
Talk to your lender early. A private lender would almost always rather renew a paying borrower than start enforcement, but renewals come with fees, and silence makes lenders nervous. If your current lender won't extend on reasonable terms, a different private lender or a B lender can sometimes pay out the first loan and buy you another term. That's a lateral move, not progress, so only do it if the new terms are genuinely better or the extra time has a clear purpose.
Do not let the term lapse without a conversation. A matured private mortgage that isn't paid out or renewed puts you in default territory, and enforcement in most provinces moves faster than borrowers expect. The fix is almost always cheaper and easier before maturity than after. If your exit plan has fallen apart entirely, get a second opinion on the whole file, because sometimes the answer is a different structure, not a bigger loan. You can see how that review works on our process page.
Solid Capital is a Canadian alternative lender built for borrowers the big banks decline or under-serve. We fund private mortgages with a written exit plan attached, because our underwriting reads the whole file: equity, income, and where you're headed, not just your credit score. If you're weighing a private mortgage or trying to leave one, talk to a Solid Capital advisor. The application takes about five minutes and there's no impact to your credit to apply.
A private mortgage should have a start date and an end date. The lender knows theirs. Make sure you know yours.
Frequently Asked Questions
How long do you have to exit a private mortgage in Canada?
Most private mortgage terms in Canada run 6 to 12 months, with renewals available if you need more time. Your exit deadline is the maturity date on your commitment letter. Start working on your exit from month one and open refinance conversations at least 90 days before the term ends.
Can you go from a private mortgage back to a bank?
Yes. Refinancing from a private lender to a bank or B lender is the most common exit route. You'll need to fix whatever caused the original decline, such as credit score, unfiled taxes, or high debt service ratios, and then qualify under the lender's rules, including the stress test at federally regulated institutions.
Does the mortgage stress test apply when leaving a private lender?
If you refinance with a federally regulated lender, yes. OSFI's minimum qualifying rate is the higher of your contract rate plus 2 percent or 5.25 percent. Straight switches at renewal with the same balance and amortization have been exempt since late 2024, so ask whether your move qualifies as a switch.
What happens if you can't pay out a private mortgage at the end of the term?
Contact your lender before maturity. Most private lenders will renew a borrower in good standing, though renewal fees apply. If they won't extend, another lender may pay out the loan and provide a new term. Letting the term lapse without an agreement risks default and enforcement, which is costlier than any renewal.
Do private mortgage renewals cost money?
Usually, yes. Renewals commonly involve a lender fee, and sometimes broker or legal fees, charged each term. Ask for the full renewal fee schedule in writing before you sign the original mortgage, and factor those costs into your exit plan so repeated renewals don't quietly erode your equity.
