In its 2025-2026 supervision work, Ontario's mortgage regulator examined a sample of private mortgage files and found the same gap in every one of them: no documented suitability assessment, and no exit strategy. FSRA has since made written exit planning a standing priority for private deals in the province. That finding says something uncomfortable about how these loans get arranged.
A private mortgage exit strategy is the written plan for repaying or replacing a private mortgage before its term runs out, normally within 6 to 24 months. A real one names four things: the lender class you are moving to, the loan-to-value you need to get there, what has to change about your file, and the date you have to be ready by. Skip it and the renewal becomes the plan by default.
If you already hold a private first or second, or you are about to sign one, this part of the deal deserves more attention than the interest rate does. Below is how the exit works in Canada in 2026, what the current rules let you do, and where most files come apart. For how the product itself is structured, our private mortgage financing page covers the ground rules.
Why your private mortgage exit strategy matters more than the rate
Private mortgages are priced for speed and risk, and they are built short. Payments are almost always interest only, so twelve months of paying does not reduce what you owe. The balance you started with is the balance you carry to maturity, plus whatever fees came off at funding.
That structure is fine when the loan is doing a job: closing on a deadline, clearing a Canada Revenue Agency balance, consolidating arrears, bridging a sale you have already committed to. It stops being fine the moment it turns permanent. Every renewal is a fresh negotiation with fresh fees, and nothing about your position has improved in between.
Here is the part borrowers underestimate in 2026. The Bank of Canada has held its policy rate at 2.25% since October 2025, through seven consecutive announcements, and most forecasters expect a long hold rather than cuts. No rescue is coming from falling rates this year. What has to improve between now and your maturity date is your file, not the market.
Honestly, if you are signing a private mortgage and nobody has written down where you go next, that is the warning sign. Not the rate.
Rate is what you pay while you are in it. The exit decides how long you are in it. Only one of those is still yours to change.
The four ways out of a private mortgage in Canada
There are four exits. Everything else is a variation on one of them.
1. Refinance to a B lender
B lenders, including many credit unions and alternative mortgage lenders, underwrite bruised credit and non-standard income. They want clean recent payment history, a loan-to-value inside their limit, and income you can document. For most private borrowers this is the realistic first stop, not a bank.
2. Refinance to an A lender
A full bank refinance turns on income ratios. Your gross and total debt service ratios have to land inside the lender's range, and the file has to qualify at the minimum qualifying rate, which is the contract rate plus two percentage points or 5.25%, whichever is higher. If that language is new, our breakdown of GDS and TDS ratios explains what those numbers measure and why files fail on them.
3. Sell the property
The cleanest exit, and the one nobody wants to plan for. The mortgage discharges at closing out of the sale proceeds. If the numbers only work on a sale, decide that in month three, not month eleven. Listing and closing take calendar time you will not have at the end of a short term.
4. A deliberate second term
Sometimes one more term is the right call, for example when a sale is already firm or a Notice of Assessment is weeks away. The word doing the work there is deliberate. A renewal you chose in advance is a plan. A renewal you discover in the final month is a bill.
The rule that catches people out
OSFI stopped requiring the minimum qualifying rate on uninsured straight switches at renewal in November 2024, which made moving between federally regulated lenders far easier. It does not help you here. Leaving a private lender is a new origination, not a straight switch, so the stress test applies in full. Plenty of borrowers assume the exemption covers them and find out otherwise at the worst possible moment. If a failed test is already part of your history, our guide to failing the mortgage stress test covers the routes that stay open.
| Exit route | What it takes | Realistic runway | Best suited to |
|---|---|---|---|
| B lender refinance | Twelve clean months of payments, loan-to-value inside their limit, documented income | 12 to 18 months | Most private borrowers |
| A lender refinance | Full income documents, ratios in range, qualifies at the minimum qualifying rate | 18 to 24 months | Files where the problem was timing, not credit |
| Sale of the property | Listing, firm offer, discharge at closing | 3 to 6 months of runway | Equity-rich, income-short situations |
| Deliberate second term | A written reason and a dated plan for term two | 6 to 12 months | A firm sale or documents landing shortly |
Pick the destination before you need it. A borrower who knows they are aiming at a B lender fourteen months out behaves differently for those fourteen months, and that behaviour is what makes the approval possible.
The 12-month private mortgage exit plan
Call it the 12-Month Exit Plan. It is not complicated. It is just early.
Month 0: write it down on funding day
Four lines on one page. Target lender class. Target loan-to-value. What has to be true about your credit and income by then. The date, which is your maturity date minus 90 days. If nobody involved in the deal will put that in writing, you have learned something useful about the deal.
Months 1 to 3: payment perfection
One 30-day late resets the clock at most B lenders, so a single missed minimum in month two can cost you the entire exit. Put every account on autopay, including the small ones people forget about. Pull your own file from Equifax Canada early and confirm it matches reality, because errors take weeks to correct and you will not have weeks later.
Months 3 to 6: fix the ratios
Bring revolving balances under 30% of each limit and leave the accounts open. Closing a card shrinks your available credit and pushes utilization up, which is the opposite of what you are trying to show. If you are self-employed, get your T1 Generals filed and your CRA balance to zero. An outstanding tax balance can register against title and sink a refinance on its own.
Months 6 to 9: build the file
Assemble what the next lender will ask for before they ask: two years of Notices of Assessment, twelve months of statements, property tax bills, your current mortgage statement, and proof the payments have been made. Underwriters read statements line by line, and our piece on what Canadian lenders look for in bank statements is worth reading before you hand yours over.
Months 9 to 12: apply early
Submit 60 to 90 days ahead of maturity. Appraisals, lawyers, discharge statements and payout figures all take real calendar time, and a private lender under no obligation to extend has very little reason to hurry. Our application process page sets out what a file review involves on our side.
Most failed exits are not credit failures. They are calendar failures.
What breaks an exit, and what it costs you
Starting at 30 days out
By then the choice is a rushed renewal or a rushed sale, and both are priced like what they are. Your lender knows the maturity date as well as you do.
Treating a renewal as free
It is not. Renewal fees get charged again, and on a second mortgage they land on top of a first that may also be moving. Two or three renewals in, the arithmetic stops working. That is precisely the outcome regulators started watching for.
Pulling more equity mid-term
Every extra dollar raises the loan-to-value you have to refinance out of, and loan-to-value is the number that decides whether a B lender can take the file at all. Taking a top-up in month five can quietly cancel the exit you planned in month zero.
Forgetting which province you are in
Enforcement timelines are not uniform across Canada. Ontario lenders can move to power of sale relatively quickly, while British Columbia and Alberta run through foreclosure. Either way the window is shorter than most borrowers assume, and it opens on default rather than at maturity.
Assuming your history disqualifies you
Often it does not. A discharged bankruptcy or a completed consumer proposal has a rebuild path, and the waiting periods are more forgiving than the rumours suggest, as our guide to getting a mortgage after bankruptcy in Canada sets out lender by lender.
Solid Capital is a Canadian alternative lender working the other side of this problem. We read the whole file, bank statements, property, revenue and the plan, instead of stopping at a credit score, which is how borrowers the big banks turned down still end up with a route out rather than another renewal. If your private term matures inside the next year, start an application. It takes about five minutes, there is no impact to your credit to apply, and a Canadian advisor reviews every file personally.
A private mortgage is a bridge. Bridges have two ends. Decide now what the far side looks like and spend the term walking toward it, because the borrower who plans the exit on funding day almost always pays less than the one who plans it in the final month. That is the whole strategy. Start early.
Frequently Asked Questions
What is a private mortgage exit strategy?
It is the written plan for repaying or replacing a private mortgage before its term ends. A complete plan names the lender class you are moving to, the loan-to-value you need, what has to change about your credit or income, and the date you have to be ready by. In Ontario, regulators expect brokers to document one on every private file.
How long does it take to exit a private mortgage in Canada?
Most successful exits take 12 to 24 months. Twelve clean months of payment history is the usual minimum before a B lender will look seriously at the file, and a move to a bank generally takes longer because the income documentation has to be complete and current.
Can you refinance a private mortgage into a bank mortgage?
Yes, though it is usually a two-step move. Borrowers typically go from a private lender to a B lender first, then to an A lender at the following renewal. Going straight to a bank works when the original problem was timing or a missing document rather than damaged credit.
Does leaving a private mortgage require passing the stress test?
Yes. OSFI removed the minimum qualifying rate for uninsured straight switches at renewal in November 2024, but that exemption only covers moves between federally regulated lenders on the same loan amount and amortization. Refinancing out of a private mortgage is a new origination, so the qualifying rate still applies.
What happens if you cannot exit when the term ends?
The usual outcome is a renewal with the same lender at a new fee, or a rushed sale. If neither happens and payments stop, the lender can start enforcement, which moves faster than most borrowers expect. Speaking to your lender or a broker 90 days out gives you options that no longer exist at 10 days out.
Does a private mortgage hurt your credit score?
The mortgage itself is not a negative mark, and many private lenders do not report to the credit bureaus at all. What moves your score is what happens around it: missed payments on other accounts, high revolving utilization, and collections. Those are the same things that decide whether your exit works.
