Overview

Private mortgage lenders in Canada offer flexible, short-term real estate financing for borrowers who cannot qualify with traditional banks. They are legal and regulated provincially, but typically charge higher interest rates due to increased risk. Approval is based more on property equity than income or credit score. Private mortgages are best used as temporary financial solutions with a clear refinance or sale plan.

What is a private mortgage?

A private mortgage is a short-term, flexible real estate loan funded by a private lender, typically used when traditional lenders are not an option.

What is a private mortgage lender company?

A private mortgage lender company is a business or individual that lends money for real estate financing outside of traditional banks or credit unions. Private lenders use their own funds or investor capital and usually focus more on the property’s value and equity than the borrower’s income or credit score.

Private lenders are commonly used when borrowers cannot qualify for traditional financing due to credit issues, self-employment income, recent defaults, or unique property types.

Is private lending legal in Canada?

Yes, private mortgage lending is legal in Canada. It is regulated at the provincial level through mortgage brokerage and lending laws.

For example, in Ontario, private mortgage transactions must be handled by properly licensed mortgage professionals, and special licensing levels exist for agents working with private mortgages.

Borrowers should always verify that brokers or lenders are licensed according to their province’s regulations.

How private mortgage lending works

Private mortgage lending typically works as follows:

1. The borrower applies through a mortgage broker or directly with a lender.

2. The lender evaluates the property value, equity, and exit strategy.

3. Terms are negotiated (interest rate, fees, length).

4. Legal documents are prepared by a real estate lawyer.

5. Funds are advanced once closing conditions are met.

Private mortgages are generally shorter-term solutions designed for refinancing, debt consolidation, or bridge financing.

Private mortgage requirements

Requirements vary, but most private lenders look for:

• Sufficient home equity (often 20–35%+)

• Property appraisal or valuation

• Clear exit strategy (refinance or sale plan)

• Proof of property ownership

• Basic income or repayment ability

• Lawyer involvement for closing

Credit scores matter less than with banks, but they can still affect pricing.

What types of properties can be financed with a private mortgage loan?

Private mortgages can finance many property types, including:

• Primary residences

• Rental properties

• Condos and townhouses

• Multi-unit residential buildings

• Commercial properties

• Construction or renovation projects

• Rural or unique properties that banks may avoid

Because underwriting is flexible, private lenders often finance properties that traditional institutions decline.

What are typical interest rates and terms for private mortgage loans?

Private mortgage rates are generally higher than bank rates because of increased risk.

Typical ranges in Canada include:

• First mortgages: ~6%–9%

• Second mortgages: ~8%–13%

• Third mortgages: ~10%–15%

• Terms: usually 6–24 months (often interest-only payments)

Rates depend on loan-to-value ratio, property type, and borrower profile.

Is it safe to borrow from a private lender?

Borrowing from a private lender can be safe when done correctly. Safety depends on:

• Using licensed brokers and legal professionals

• Reading all fees and terms carefully

• Avoiding unrealistic promises or pressure tactics

• Ensuring the lender explains risks clearly

Regulators emphasize that private mortgages can carry unique risks and require informed consent.

How hard is it to get a private mortgage?

Private mortgages are usually easier to qualify for than bank mortgages because approval focuses mainly on:

• Property equity

• Exit strategy

• Asset value

Borrowers with poor credit, self-employment income, or recent financial issues often qualify more easily than with major banks.

Is it better to go with a private lender or bank for a mortgage?

Bank

Pros

• Lower interest rates

• Longer mortgage terms

• Strong consumer protections

• Lower fees

Cons

• Strict income verification

• Higher credit score requirements

• Slower approval for complex files

• Less flexibility

Private lender

Pros

• Fast approvals

• Flexible qualification criteria

• Works with bruised credit or unconventional income

• Short-term solutions available

Cons

• Higher interest rates

• Lender and broker fees

• Shorter terms requiring refinancing

• Greater risk if exit strategy fails

How to get private mortgage: process overview

1. Initial consultation with broker or lender

2. Property evaluation/appraisal

3. Review of borrower situation and exit plan

4. Term sheet approval

5. Legal review and signing

6. Funding and closing

Documents required for getting a private mortgage

Typical documents include:

• Government ID

• Property tax statement

• Mortgage statement(s)

• Proof of income (if available)

• Bank statements

• Credit report (sometimes optional)

• Real estate purchase agreement (for purchases)

• Recent appraisal

How much interest do private lenders charge?

Interest rates vary by risk but usually range between 6% and 15% depending on:

• Mortgage position (first, second, third)

• Loan-to-value ratio

• Property type

• Borrower profile

• Market conditions

Additional fees may include lender fees, broker fees, and legal costs.

How do I know if a private lender is legit?

Check the following:

• Licensed broker or brokerage in your province

• Transparent written terms

• Professional legal documentation

• No pressure to falsify income or documents

• Positive reputation and reviews

Avoid anyone suggesting fraudulent documents or shortcuts — this is illegal and dangerous.

How long does it take to receive a private loan?

Private mortgage approvals are usually fast:

• Initial approval: 24–72 hours

• Full funding: about 3–10 business days

Timing depends on appraisal completion, legal paperwork, and document readiness.