Private Mortgages in Canada. Know the Cost Before You Borrow.

A private mortgage is a property-secured loan provided outside the conventional bank mortgage route. The lender may be an individual, company, mortgage investment corporation or another non-bank financing source. Costs and terms depend on the transaction.

Borrowers may explore private financing when conventional approval is unavailable because of income, credit, debt, property characteristics or a time-sensitive need. It should be considered alongside realistic lower-cost alternatives.

No. Credit challenges are one reason, but self-employed income documentation, unusual property types, construction needs or urgent mortgage deadlines can also lead borrowers to consider private financing.

Private mortgage interest rates and fees are commonly higher than conventional mortgage financing. Actual pricing varies by property, LTV, mortgage position, borrower circumstances, lender and term.

Private mortgages are commonly used for short-term financing. Ontario's FSRA describes alternative and private mortgages as typically temporary arrangements, often for one or two years. The actual term is established by the lender's contract.

An exit strategy is a realistic plan for repaying the private mortgage at or before maturity. It may involve qualifying for lower-cost refinancing after documented improvements, completing a property project or selling the property.

Yes. Private lenders may place considerable emphasis on property value, LTV and mortgage security. Repayment affordability and the feasibility of the exit strategy should still be carefully reviewed.

Not every private mortgage is subject to the same rules. OSFI's mortgage qualifying-rate framework applies to federally regulated financial institutions in relevant situations. Other lenders may use different underwriting requirements. An exemption from bank rules does not guarantee eligibility.

Many private mortgages use interest-only payments, meaning regular payments cover interest while principal remains outstanding. Other payment structures are possible. Review the contract and calculate the amount due at maturity.

Possible charges include lender fees, legal costs, appraisal, administration, brokerage, renewal, prepayment, late-payment and default-related fees. Request a written breakdown of all applicable charges.

Sometimes. Depending on the lender and terms, fees may be deducted from proceeds, paid upfront or added to the principal. Financing fees increases the mortgage balance and may increase interest costs.

Potentially. A private loan may be registered behind an existing first mortgage. Combined LTV, registration priority, interest costs, payment affordability and the exit strategy are particularly important.

Not automatically. A B-lender may offer less expensive financing if you meet its requirements. Private financing may be considered when other options are not available. Read the private mortgage vs B-lender guide.

Potentially. But consolidating unsecured debts through a private mortgage places those debts against the property. The plan should explain how the total debt will decline and how the borrower will leave the higher-cost financing arrangement.

The lender may not be required to renew the mortgage. Alternatives could involve a costly extension, another refinancing arrangement, sale or contractual enforcement. This is why the exit strategy should be realistic before funding.

Yes. A private mortgage is secured against real estate. Serious failure to meet contract obligations can lead to legal enforcement, which may ultimately put the property at risk.

Mortgage licensing rules vary by province. Check the applicable regulator's public records, confirm any required licence or registration, clarify who the professional represents, review written disclosures and obtain legal advice as appropriate.