Securing a private mortgage in Canada can be a great option if you’re unable to get approval through traditional lenders like banks. However, private mortgages come with their own set of challenges, particularly when it comes to securing the best possible interest rate. With the Canadian real estate market continuously growing, it’s essential to understand the key factors that can impact your mortgage rate in 2025.
In this blog post, we’ll guide you through the steps to secure the best private mortgage rate today, discuss current market conditions, and provide tips on how to present yourself as a desirable borrower to private lenders.
Understand the Private Mortgage Landscape in Canada in 2025
The mortgage market in Canada is diverse, with options ranging from traditional bank loans to private lenders who offer more flexible terms. Private lenders, including individuals, and smaller lending institutions, offer alternative financing to borrowers who may not qualify for conventional mortgages due to factors like low credit scores, high debt ratios, or non-traditional income sources.
In 2025, private mortgage rates tend to be higher than traditional bank rates, as lenders are taking on more risk. These rates vary based on factors like the borrower’s financial profile, the property type, and the lender’s terms. Understanding the current interest rate environment will help you make informed decisions and ensure you’re securing the best possible deal.
Know Your Credit Score and Financial Standing
Your credit score is one of the most significant factors that will influence the interest rate you’re offered by a private lender. While private lenders are more flexible than banks when it comes to credit scores, they still assess risk carefully and will charge higher rates for borrowers with poor credit histories.
Before applying for a private mortgage, check your credit score. In Canada, you can obtain a free credit report from major credit bureaus like Equifax or TransUnion. If your score is low, take steps to improve it by paying down existing debt, reducing your credit card balances, and ensuring there are no errors in your report.
If your credit score is not ideal, you might still be able to secure a private mortgage, but be prepared to pay a higher interest rate to offset the lender’s increased risk. Alternatively, you could consider improving your credit score before applying for a mortgage, which could help you secure a more favorable rate.
Shop Around and Compare Lenders
When seeking a private mortgage, it’s crucial to shop around and compare the rates offered by different lenders. While some private lenders may advertise their rates publicly, others may not, making it essential to reach out to various sources. You can explore:
- Private Lenders: There are a number of smaller financial institutions and individuals who may offer private mortgages, and their rates can vary widely.
- Mortgage Brokers: A mortgage broker specializing in private lending can be an invaluable resource, as they can help you navigate through multiple lenders and negotiate the best rate based on your unique financial profile.
In 2025, it’s important to consider the terms in addition to the rate. While a lender might offer a lower rate, they may impose fees or unfavorable terms. Compare not only the interest rate but also the loan-to-value (LTV) ratio, prepayment options, fees, and flexibility in repayment schedules.
Present Yourself as a Strong Borrower
Private lenders take a more personalized approach when assessing potential borrowers, but they also want to ensure they are making a safe investment. To increase your chances of securing a competitive rate, present yourself as a reliable borrower. Here are some ways to do so:
- Demonstrate Your Ability to Repay: Show the lender your income streams and any assets you have to prove your ability to repay the loan. The more financially stable you appear, the more likely a lender will offer a favorable rate.
- Offer a Larger Down Payment: Offering a larger down payment reduces the lender’s risk. A down payment of at least 20% is typically recommended, as it lowers the loan-to-value (LTV) ratio and can result in a better interest rate.
- Provide Collateral: If possible, offering additional collateral (such as other properties or assets) may give lenders more confidence in your ability to repay, potentially leading to a lower rate.
- Minimize Debt: Lenders often look at your debt-to-income ratio (DTI), so minimizing existing debt can improve your profile. The less debt you have, the more attractive you are to lenders.
Negotiate the Terms
Private mortgage rates are often negotiable, so don’t be afraid to negotiate the terms with lenders. While banks have rigid policies, private lenders can be more flexible, particularly if you have a strong financial standing.
Here are some strategies to negotiate a better rate:
- Offer More Security: If you can provide additional security (such as a co-signer, second property, or more assets), this can reduce the lender’s risk, which may result in a more favorable rate.
- Shorten the Term: Lenders often offer better rates for shorter loan terms because the loan is repaid faster. If you can afford a shorter loan term, this could result in a lower interest rate.
- Request a Rate Lock: If you’re negotiating in a volatile market, consider asking for a rate lock. This ensures that your rate will not change during the negotiation period, protecting you from interest rate fluctuations.
Be Mindful of Fees and Terms Beyond the Interest Rate
While securing the lowest possible interest rate is important, it’s also essential to examine the full loan package. Often, private lenders will charge additional fees for processing, administration, or even early repayment. These fees can add up and make a seemingly good deal less attractive.
When comparing lenders, ask about:
- Prepayment Penalties: Some lenders charge penalties if you pay off the mortgage early. Understand these terms before committing.
- Setup Fees: These could include appraisal, legal, or brokerage fees. Make sure you factor them into your overall cost of borrowing.
- Renewal Fees: Some private mortgages are short-term and require renewal after a few years. Check the renewal terms to ensure you won’t be hit with high fees or a sudden increase in interest rates.
Monitor Market Conditions
Interest rates and lending policies fluctuate in response to market conditions, so it’s crucial to stay informed about changes. In 2025, the Bank of Canada’s rate decisions, inflation, and broader economic factors will influence the cost of borrowing.
By keeping an eye on the macroeconomic environment, you’ll be better equipped to lock in a favorable rate at the right time. If interest rates are expected to rise, it may be a good idea to secure your mortgage sooner rather than later. Conversely, if rates are high, you might decide to wait until the market stabilizes.
Securing the best private mortgage rate in Canada in 2025 requires a combination of preparation, research, and strategy. Start by understanding your financial profile and credit score, then shop around for different lenders, compare their terms, and negotiate where possible. By presenting yourself as a reliable borrower, being mindful of additional fees, and staying informed about the market, you can increase your chances of securing a competitive rate and make your private mortgage a more affordable investment.
Contact Us to Apply for Private Mortgage in Vaughan
With over 15 years of experience and more than 5,000 approved mortgages, Mortgage Squad Advisors has become one of the top-rated mortgage brokers in Vaughan. Known for delivering exceptional service and expertise, we are the trusted choice for homeowners seeking reliable mortgage solutions. Our team of experienced mortgage agents carefully evaluates options from a wide range of lenders, ensuring you save time and secure the most competitive rates available.