A private mortgage is a short-term tool, not a permanent address. Most Canadian borrowers who take one out are doing it to buy time: repair credit, stabilize income, or close the gap after a bank declined them. The problem is that "buy time" only works if you have a plan to get out.
This guide walks through what a realistic private mortgage exit strategy looks like in Canada, what the timelines actually are, and what you need to do during the term so a bank or B lender will say yes when the time comes.
What exit strategy actually means for a private mortgage
When a private lender reviews your file, one of the first things they want to see is how you plan to leave. This is not a trick question. It is a practical one. Private mortgages typically run for 6 to 24 months. The lender needs confidence you can refinance out before the term ends. For context on how private mortgages work before you get to this stage, see Solid Capital's lending guides.
An exit strategy is a documented plan that answers three things:
- How will you qualify with a conventional or B lender when the term ends?
- What will your credit score look like by then?
- What income documents will you be able to show?
If you cannot answer those three questions before signing with a private lender, the exit will be harder than the entry.
Why private lenders care about this
Private lenders in Canada operate on short terms precisely because they are not set up to hold mortgages indefinitely. Most are individual investors, Mortgage Investment Corporations (MICs), or syndicates. They lend against the equity in the property, not your long-term creditworthiness. But they still need to know you have a path out, because if you don't, you end up in a renewal cycle that costs you more with each term.
A borrower with no exit plan tends to roll over the same private mortgage year after year. Each renewal comes with new lender fees, new broker fees, and another 12 months of private-rate interest. That adds up fast.
The most common paths back to a bank or B lender
Most borrowers leaving a private mortgage are heading to one of two places: an A lender (one of the big banks or a federally regulated credit union) or a B lender (a trust company or mono-line lender that uses alternative underwriting but at lower rates than private).
Path 1: Credit repair and score rebuilding
The most common reason someone ends up with a private mortgage is a damaged credit score (a missed payment, a consumer proposal, a period of unemployment, or simply too many applications in a short window).
Equifax Canada reports that it takes 6 to 24 months of consistent on-time payment behaviour to meaningfully shift a credit score, depending on the severity of the original damage. A consumer proposal stays on the bureau for 3 years after discharge. A single missed mortgage payment can drop a score by 60-100 points and takes roughly 12-18 months of clean payment history to recover.
- Pay every bill on time, every month. Not one miss.
- Keep credit card balances below 30% of the limit (utilisation is the second-largest scoring factor).
- Don't apply for new credit during the private term unless it can't be avoided. Each hard inquiry costs you points.
- If you had a consumer proposal or bankruptcy, get a secured credit card immediately and use it for small recurring charges.
Path 2: Income documentation cleanup
Self-employed borrowers make up a large share of private mortgage clients. The issue is rarely income itself. It's that the income isn't documented in a way that satisfies OSFI's stress test requirements for A lenders.
A lenders want 2 years of T1 Generals and Notices of Assessment from the Canada Revenue Agency. They look at net income after deductions, which for many business owners is much lower than actual cash flow. B lenders are more flexible: some will look at stated income with strong bank statement backup, or use a gross-up factor on self-employment income.
- Work with an accountant to structure your personal income in a way that shows qualifying income on paper, not just in your business bank account.
- Two years of clean NOAs is the A lender target. One year with strong bank statements can often satisfy a B lender.
- Keep 6-12 months of personal and business bank statements. B lenders use these to verify cash flow even when the NOA is modest.
Path 3: LTV reduction
Private lenders in Canada typically lend up to 80% loan-to-value (LTV) on residential properties, sometimes up to 85% in certain markets. B lenders and A lenders won't touch a mortgage above 80% LTV without CMHC insurance, and CMHC doesn't insure refinances above 80%.
If your property has appreciated during the private term, or if you've made principal payments, the math may work out on its own. If not, paying down the balance to get under the LTV threshold your target lender requires is a legitimate exit move.
Honestly, if you have equity in the property and a clean payment record, the exit is almost always achievable. The challenge is almost always on the income or credit side.
Timeline: what to do in each month of a private term
Private mortgage terms in Canada are usually 12 months. Here's what a realistic exit timeline looks like if you're planning to move to a B lender or bank at renewal.
Months 1-3: Set the baseline
Pull your credit report from both bureaus. Dispute any errors. Know your exact score. Meet with a mortgage broker and ask them to model what your qualifying income will look like in 12 months under a B lender's criteria. If you're self-employed, talk to your accountant immediately about your current-year income structuring.
Months 4-6: Build the paper trail
Make every payment on time. Start accumulating bank statements. If you're working on credit score recovery, this is when the consistent payment history begins to register. Document any income events: new contracts, business revenue increases, salary changes.
Months 7-9: Run a soft pre-qualification
Ask your mortgage broker to do a soft pre-qualification check with 2-3 B lenders. This doesn't trigger hard inquiries. It will tell you whether your file is on track or whether you need another 6 months. If the answer is another 6 months, you know now, not in month 12 when you're scrambling for a renewal.
Months 10-12: Lock in the exit
Begin the formal application with your target lender 60-90 days before the private term ends. Give yourself time for the underwriting process and any conditions. Don't wait until the last month. A private lender renewal at month 12 with new fees is what you're trying to avoid.
What happens if you can't exit on time
Not every exit goes to plan. A job change, a market shift, an unexpected expense. It happens. Here's what the options actually look like.
Renewing with the same private lender
If your existing private lender is willing to renew, this is usually the least disruptive option. The rate may stay the same or increase slightly. You'll likely owe lender fees again (typically 1-3% of the mortgage amount). A broker fee applies if one is involved.
The risk is that each renewal extends your time at private rates and delays the credit and income improvements you're trying to build. A renewal can be the right call. Just treat it as a tactical delay, not a permanent solution.
Moving to a different private lender
If your current lender won't renew, or if you can find better terms elsewhere, switching private lenders is common. You'll need a current appraisal (most lenders require one no older than 6 months), a clear title search, and a new commitment letter.
The costs: appraisal ($350-$600), legal fees ($800-$1,500), new lender fee (1-2%), broker fee if applicable. Budget $3,000-$7,000 in transaction costs depending on the mortgage size.
Extending the term proactively
Some borrowers know at month 9 that 12 months won't be enough. Rather than scrambling at maturity, the better move is to start conversations with the lender about an extension at month 9. Private lenders often prefer a 3-6 month extension to a full renewal, at lower transaction costs, if the borrower is clearly on track but just needs a bit more time.
If you're trying to map out your private mortgage exit and want a second set of eyes on your file, talk to a Solid Capital advisor. You can also review how private mortgages work at Solid Capital before you apply. The application takes about five minutes, there's no impact to your credit to apply, and a Canadian advisor reviews every file personally.
Frequently Asked Questions
How long does it typically take to exit a private mortgage and move to a bank?
Most borrowers need 12 to 24 months, depending on the reason they ended up with a private mortgage. Credit repair takes the most time. Income documentation for self-employed borrowers can often be addressed within one 12-month term if the groundwork starts early. B lenders are typically the first step after private, before an A lender.
Can I refinance a private mortgage into a conventional mortgage with one of the big banks?
Yes, but you need to satisfy the OSFI mortgage stress test, which as of 2026 requires qualifying at either the contract rate plus 2% or 5.25%, whichever is higher. Your credit score typically needs to be above 680 for most A lenders, and you need 2 years of provable income history. If you're self-employed, most major banks will require T1 Generals and NOAs rather than bank statements alone.
What credit score do I need to move from a private mortgage to a B lender?
Most B lenders in Canada work with scores in the 550-620 range, depending on the loan-to-value ratio and income documentation. Some go lower. The stronger your income documentation and the lower your LTV, the more flexibility a B lender has on the credit score requirement.
Do private mortgage renewal fees count as income for tax purposes?
No. Mortgage fees paid by a borrower (lender fees, broker fees, legal fees) are not taxable income. They're a cost of financing and may be deductible as a borrowing cost if the mortgage is on a rental or investment property. Talk to a tax professional for your specific situation.
What is the difference between a private mortgage exit strategy and a refinance?
A refinance is the mechanism: you replace one mortgage with another, usually with better terms. An exit strategy is the plan that makes the refinance possible. It covers the credit repair, income documentation, and LTV management you do during the private term so that when you apply to refinance, you actually qualify.
Can Solid Capital help with both the private mortgage and the exit to a conventional lender?
Solid Capital provides private mortgages and works with borrowers on a file-by-file basis. A Canadian advisor reviews every application. While Solid Capital isn't a bank, the team can help you understand what your file needs to look like to qualify with a conventional or B lender, and can discuss timing with you at application and at renewal.
