Private Mortgages in Canada: When They Make Sense & What They Cost

A private mortgage in Canada is a short-term loan secured against your property — funded by a private individual investor or a Mortgage Investment Corporation (MIC), not a bank or credit union. It exists specifically for situations where traditional lenders have said no, and where equity in your property is stronger than your current credit score or income documentation.

If you've been declined by your bank, or you know your situation won't pass the stress test, income verification, or credit check that A-lenders require, a private mortgage may be a path worth understanding — not as a permanent solution, but as a short-term bridge to better financing.

Quick answer: A private mortgage in Canada is a short-term, property-secured loan from a private investor or MIC — used when banks and B-lenders decline an application. It typically costs more than conventional financing in both interest and fees. In Ontario, all private mortgages arranged through a broker must be handled by an FSRA-licensed professional who is legally required to disclose all costs before you commit.

This guide covers who uses private mortgages, what they cost, how LTV works, how to compare private vs alternative lenders, and — most importantly — how to plan your exit strategy before you enter.

Key Takeaways

• Private mortgages are funded by private investors or MICs, not banks — they approve based primarily on property equity, not credit score.
• Six common borrower scenarios use private mortgages: damaged credit, self-employed income gaps, bridge financing, power of sale situations, divorce equity access, and investment properties.
• Costs are significantly higher than A or B lenders — both in interest rate and lender arrangement fees. All fees must be disclosed in writing per FSRA Ontario requirements.
• Most private lenders in Ontario cap loans at 65–75% LTV. Lower LTV = more lender options and lower cost.
• Every private mortgage needs a clear exit strategy — these are short-term instruments (6–12 months). Plan before you borrow.
• An FSRA-licensed Ontario broker protects you with vetted lenders, mandatory fee disclosure, and a structured plan to move to better financing.

What Is a Private Mortgage?

A private mortgage works by using your property as collateral for a short-term loan funded by a private investor or Mortgage Investment Corporation — not a regulated bank — with approval based primarily on property equity rather than credit score or income documentation.

Definition moment: Private lender (as used in Ontario mortgage brokerage) — an individual investor, family office, or Mortgage Investment Corporation (MIC) that deploys capital into short-term, property-secured loans outside the traditional banking system. They are not regulated the same way as banks but must comply with FSRA mortgage brokerage rules when working through licensed brokers in Ontario.

Unlike A-lenders (chartered banks like RBC, TD, and Scotiabank) or B-lenders (alternative trust companies and monoline lenders), private lenders do not follow OSFI B-20 stress test guidelines or require the same income verification standards. Their primary risk assessment tool is the loan-to-value ratio — how much you're borrowing relative to what the property is worth.

Private mortgages are registered on your property title as either a first or second mortgage. A first private mortgage replaces or refinances your existing mortgage. A second private mortgage sits behind your existing first mortgage and draws on remaining equity — useful when you don't want to break your current first mortgage.

According to FSRA Ontario, all mortgage transactions brokered in this province — including private mortgage placements — must be handled by licensed and regulated mortgage brokers and agents. This means the person arranging your private mortgage has legal obligations: they must disclose all costs, act in your interest, and follow FSRA conduct standards. Source: FSRA Mortgage Brokering sector overview, 2025.

Bottom line: A private mortgage gives equity-rich Ontarians access to short-term financing that banks won't provide — but it comes at a real cost that must be understood before signing. Understanding how it works is the first step.

Who Uses Private Mortgages in Canada?

Who uses private mortgages in Ontario is broader than most people expect — from homeowners in power of sale situations to self-employed buyers and people in life transitions whose equity is real but whose bank qualification is not.

Six common borrower situations where a private mortgage may be the right short-term path:

1. Damaged or low credit score — Banks and most B-lenders require minimum credit score thresholds. Borrowers who have gone through a consumer proposal, bankruptcy, debt settlement, or a period of missed payments may not meet those thresholds. Private lenders evaluate the property equity, not the credit file — making them accessible when credit-based lenders say no.
2. Self-employed borrowers with income a bank won't fully accept — Many established self-employed Canadians earn real, consistent income that isn't reflected in their Notice of Assessment. Banks and many B-lenders want documented T4 or NOA income. Some private lenders accept business bank statements, accountant-prepared financials, or other non-standard income verification — or no income verification at all, relying solely on equity.
3. Bridge financing — buying before selling — If you've committed to buying a new home but your existing home hasn't sold yet, a private bridge mortgage can cover the short-term funding gap. Bridge financing is one of the most common and typically lowest-risk private mortgage use cases because the exit (selling the existing property) is already in motion.
4. Stopping a power of sale — If you've received a power of sale notice in Ontario, a private mortgage can provide emergency funds to pay mortgage arrears and stop the sale process — giving you time to stabilize your finances, refinance properly, or sell on your own terms. Acting quickly is essential once a notice is received.
5. Equity access during divorce or estate settlement — When a relationship ends and equity needs to be distributed, private financing can move faster than courts. If one co-owner needs to buy out another before the division is finalized, private capital provides short-term access to the equity while legal processes complete.
6. Investment property where rental income doesn't qualify — Real estate investors sometimes find that the way banks count rental income doesn't reflect what the property actually generates. Private lenders can evaluate the property independently — particularly for multi-unit or mixed-use properties in Ontario.

If any of these scenarios apply to your situation, explore what options may be available by reviewing lendsimpl's full private mortgage services in Ontario — including city-specific resources for Toronto, Scarborough, Richmond Hill, and more.

What Does a Private Mortgage Cost in Ontario?

What a private mortgage costs in Ontario depends on your loan-to-value ratio, property type, credit situation, lender, and term length — and fees are always in addition to the interest rate charged.

Private mortgages consistently cost more than A-lender or B-lender products. This is by design — private capital carries higher risk and requires higher return expectations than institutional capital. For a borrower, the total cost of a private mortgage includes two distinct layers.

Layer 1 — The Interest Rate: Private mortgage interest rates in Ontario are substantially higher than bank rates or B-lender rates. Exact rates vary by lender, your LTV, property location, and current market conditions — and they change over time. For planning purposes, think of a private mortgage rate as several percentage points above what you would see from a standard B-lender product. Do not assume any quoted rate will match current market conditions — always get a current quote from a licensed broker.

Illustrative example only — not a rate quote: To understand the math, imagine a private lender quoted a rate of 10% (hypothetical example — actual rates will differ). On a $200,000 balance with interest-only payments, that would work out to approximately $1,667 per month. At a hypothetical 12%, the same balance would cost approximately $2,000 per month. These numbers are for illustration only. Your actual rate will depend on your specific situation, the lender, and current market conditions.

Layer 2 — Lender Fees and Broker Fees: Private mortgages typically include a lender arrangement fee charged as a percentage of the loan amount — often deducted directly from the amount advanced. Brokerage fees may also apply. In Ontario, all fees must be disclosed in writing before you commit. FSRA requires full transparency on mortgage brokering costs, including fees payable to the broker and the lender.

Total cost comparison: When evaluating a private mortgage, calculate the full annualized cost including interest and fees — not just the rate alone. A licensed Ontario mortgage broker is required by FSRA regulation to provide you with a cost-of-borrowing disclosure before completing any mortgage transaction.

Bottom line: Private mortgages cost significantly more than conventional financing — that is unavoidable. The relevant question is whether the short-term cost is justified by the outcome: stopping a power of sale, completing a bridge transaction, or buying time to repair credit and qualify through a better lender channel.

Ontario Private Mortgage LTV and Use-Case Overview

How much you can borrow through a private mortgage in Ontario depends primarily on how much equity you have in your property. Private lenders control their risk by capping the loan-to-value ratio — the percentage of the property's appraised value they're willing to lend against.

Typical LTV structure for Ontario private mortgages (for reference — not a guarantee of approval or pricing):

• Up to 65% LTV — Typical for bridge financing and straightforward equity access. This tier typically attracts the most lender interest and may offer comparatively better terms within the private lending range. Most urban Ontario properties qualify.
• 65–75% LTV — The standard range for most private lending in Ontario, including bad credit refinances and short-term bridge situations. More lenders operate in this tier than at higher LTVs.
• 75–80% LTV — Fewer private lenders operate here. Costs are typically higher and fewer property types qualify. Lender options narrow significantly above 75% LTV.

Property type and location matter: Private lenders in Ontario are generally most comfortable with single-family residential properties in major urban and suburban markets — Toronto, Scarborough, North York, Pickering, Ajax, Richmond Hill, Ottawa, and the broader GTA. Rural properties, unique property types, and areas with limited comparable sales may have fewer private lender options regardless of LTV.

For rate context across lender types, see lendsimpl's private mortgage rates Ontario page — which provides general market context on how private lending is priced relative to other options.

Private Lender vs Alternative (B) Lender: Which Do You Need?

The difference between a private lender and a B-lender (alternative lender) is that B-lenders are regulated financial institutions with standard qualification criteria, while private lenders are individuals or investment corporations who set their own terms — making B-lenders the better option whenever a borrower qualifies.

Many Ontario borrowers who have been declined by their primary bank can still qualify through an alternative B-lender. If that's possible, it's almost always a better financial outcome than going private — B-lender products are regulated, have lower rates, and provide more flexibility on term selection.

When does a B-lender make more sense than a private lender?

• Your credit score is 550 or above — most B-lenders have minimum score thresholds in this range.
• You have some documented income, even if non-traditional (rental income, freelance deposits, business bank statements).
• Your LTV is manageable and the property is in a major market.
• You don't have a time-critical emergency like an imminent power of sale.

When does private lending make more sense than a B-lender?

• You're in a power of sale situation that requires emergency funds within days — B-lenders rarely move fast enough.
• Your credit is below the minimum threshold for any B-lender option.
• You have a clean short-term bridge need (buying before your existing home sells) and don't want to disturb your current mortgage.
• Income documentation isn't available in any form that B-lenders accept.

See lendsimpl's guide to alternative mortgage rates and B-lender options in Ontario if you're not sure which category applies to your situation.

Planning Your Exit Strategy Before You Borrow

An exit strategy from a private mortgage means planning — before you borrow — exactly how you will repay the private lender within the term. This is not optional: private mortgages in Ontario are short-term instruments, typically 6 to 12 months, sometimes up to 24 months. They are not designed to be renewed indefinitely.

Three common exit paths for Ontario private mortgage borrowers:

1. Credit repair then refinance to B-lender or bank — If your private mortgage was triggered by damaged credit, use the term period to repair your credit score: pay all obligations on time, reduce credit utilization, and clear any outstanding collections. After 6 to 12 months of clean payment history, a licensed broker may be able to move you to a B-lender or, eventually, an A-lender.
2. Sale of the property — If you're using a private mortgage to access equity in a property you plan to sell, the exit is built in. Ensure your sale timeline aligns with your private mortgage term — a licensed broker can help structure the term to match your expected sale closing date.
3. Resolution of the income verification gap — Self-employed borrowers often use private financing as a bridge while building 12 to 24 months of documented business financials. Once a full year of tax returns and accountant-prepared statements are available, qualification through a B-lender or bank becomes much more achievable.

Warning: Borrowers who enter private mortgages without a clear, documented exit plan sometimes find themselves renewing at increasing costs — or in a worse financial position than when they started. A licensed Ontario mortgage broker should outline your exit plan before the private mortgage is arranged, not after.

Bottom line: Think of a private mortgage as renting a financial solution. It costs more than owning the solution outright (conventional financing), but it gets you through a situation that would otherwise have no resolution. The goal is always to move to better, longer-term financing as soon as your circumstances allow.

How lendsimpl Sources Private Lenders in Ontario

How lendsimpl sources private lenders means connecting borrowers to a vetted network of private investors and MICs through FSRA-licensed mortgage brokers — with full fee disclosure required before you commit to anything.

Private lending in Ontario is not a transparent marketplace where borrowers can easily shop independently. Most private lenders work exclusively through licensed brokers, and going directly to a private lender without broker guidance creates real risk: undisclosed fees, unfair terms, and potential dealings with unregistered or non-compliant lenders.

lendsimpl's approach to private mortgage placements:

1. Review your situation honestly — Before recommending private financing, a lendsimpl broker will assess your equity position, credit situation, income documentation, and urgency. If a B-lender path is available, that will be presented first.
2. Access a vetted private lender network — lendsimpl's FSRA-licensed brokers have established relationships with private investors and MICs that operate within Ontario's regulatory framework and have a track record of fair dealing.
3. Full cost disclosure upfront — Every lender fee, arrangement fee, broker fee, interest rate, and term condition is presented in writing before you agree to anything. No surprises at funding.
4. Structure your exit plan — Before the private mortgage is arranged, a lendsimpl broker will document the specific path to better financing and the expected timeline to get there.

lendsimpl has worked with private mortgage borrowers across the GTA and Ontario — in Toronto, Scarborough, North York, Richmond Hill, Pickering, Ajax, and Ottawa. Whatever the situation, the approach is the same: honest, transparent, and judgment-free.

If you're also looking at home equity options, see lendsimpl's comparison of private HELOC vs refinance options in Ontario — useful context if equity access is the underlying goal.

5 Common Private Mortgage Mistakes Ontario Borrowers Make

Avoiding these mistakes separates borrowers who use private mortgages as effective short-term tools from those who end up in a worse position than when they started.

1. Entering without an exit plan — The most common and most expensive mistake. If you don't know how you'll repay the private lender at term end, you may be forced to renew at higher cost or face default. Plan the exit before you sign. A broker should document this with you.
2. Not comparing B-lender options first — Private lending is not always the only option. Many borrowers assume they need private financing but actually qualify for a B-lender product at significantly lower cost. Always ask your broker: 'Is there a B-lender path here?'
3. Focusing on the rate without calculating the full cost — The rate alone doesn't tell the full story. Lender arrangement fees can add thousands to the effective cost of a short-term private mortgage. Ask for the full cost-of-borrowing disclosure — your broker is legally required to provide it in Ontario.
4. Using a broker who isn't FSRA-licensed — Unregistered mortgage intermediaries exist. Using one puts you outside FSRA consumer protection rules. Before working with any broker on a private mortgage, confirm their FSRA licence number at the FSRA public registry. lendsimpl is FSRA-licensed brokerage #13763.
5. Borrowing more than you need — Private lending costs more than conventional financing. Borrowing more than your situation requires increases your total interest and fee burden unnecessarily. Borrow the minimum needed to achieve your specific goal.

Frequently Asked Questions: Private Mortgages in Canada

What is a private mortgage in Canada?

A private mortgage in Canada is a short-term loan secured against your property and funded by a private individual investor or Mortgage Investment Corporation — not a bank or credit union. Private lenders focus primarily on the equity in your property rather than your credit score or income documentation, making them accessible when traditional lenders decline your application. In Ontario, all private mortgages arranged through a broker must be handled by an FSRA-licensed professional who has legal obligations to disclose all costs and act in your interest. They are typically registered as a first or second charge on your property title.

How much does a private mortgage cost in Ontario?

Private mortgages cost significantly more than A-lender or B-lender products — in both interest rate and lender arrangement fees. The exact cost depends on your loan-to-value ratio, property type, lender, and current market conditions. As an example only: if a private lender quoted a rate of 10% (hypothetical — actual rates vary and change over time) on a $200,000 balance with interest-only payments, monthly interest would be approximately $1,667. Lender fees are charged separately and can add further cost. In Ontario, all fees must be disclosed in writing by your FSRA-licensed broker before you commit. Always request a full cost-of-borrowing breakdown.

What is the maximum loan-to-value for a private mortgage in Ontario?

Most private lenders in Ontario cap loans at 65–75% of the property's appraised value. Some lenders may go to 80% LTV in specific situations, though fewer lenders operate at higher LTVs and costs tend to increase. The lower your LTV, the more lender options you have and the better the terms available within the private lending range. Properties in major Ontario markets — Toronto, Scarborough, North York, Richmond Hill, and the GTA — typically attract more private lenders than rural or remote properties with limited comparable sales.

How quickly can a private mortgage close in Ontario?

Private mortgages can close in as few as 3 to 7 business days when property appraisal and legal documentation are ready. Exact timing depends on the lender, the complexity of the file, and how quickly the borrower can provide required documentation such as a property appraisal, mortgage statement, and ID. A licensed Ontario broker coordinates the appraisal, the real estate lawyer, and the lender to keep the timeline on track. Power of sale situations sometimes require faster action — contact a broker immediately when a power of sale notice is received.

What should I do if I receive a power of sale notice in Ontario?

If you receive a power of sale notice on your Ontario property, act immediately — do not wait for the redemption period to pass. A licensed Ontario mortgage broker can assess whether private financing or other solutions can help you access funds to pay mortgage arrears and stop the power of sale process. Time is the most critical factor — the sooner you speak with a broker, the more options remain available. lendsimpl handles power of sale inquiries with full confidentiality. lendsimpl is FSRA-licensed brokerage #13763.

Is a private mortgage a good option for self-employed borrowers in Ontario?

A private mortgage may help self-employed Ontario borrowers whose income structure banks and many B-lenders won't accept. However, before going private, a licensed broker should first determine whether an alternative B-lender can approve your file — often at significantly lower total cost. If B-lender options are not available, private financing can bridge the gap while you build 12 to 24 months of documented business financials that will support future qualification. See lendsimpl's dedicated guide to

See lendsimpl's guide to self-employed mortgages in Ontario for a full picture of income documentation strategies before choosing private financing.

Sources

• FSRA Ontario — Mortgage Brokering sector overview and licensee obligations: https://www.fsrao.ca/industry/mortgage-brokering
• OSFI — Guideline B-20: Residential Mortgage Underwriting Practices and Procedures: https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures
• Financial Consumer Agency of Canada — Understanding mortgage default and power of sale: https://www.canada.ca/en/financial-consumer-agency/services/mortgages/mortgage-arrears.html
• Bank of Canada — Financial System Review, household debt and mortgage lending context: https://www.bankofcanada.ca/publications/fsr/

Disclaimer

This article is for general educational purposes only and should not be taken as financial, legal, or mortgage advice. Mortgage options, rates, approvals, and lender requirements can vary based on borrower profile, property details, credit history, income, equity, documentation, and current market conditions. Speak with a licensed mortgage professional before making a mortgage decision. lendsimpl is a licensed mortgage brokerage in Ontario (FSRA #13763).