Private Mortgage in Canada — Equity-Based Financing When Banks Say No
A short-term mortgage based on your home’s equity, not your credit score — for the complex and time-sensitive files banks and B-lenders decline. Commitment in as little as 24–48 hours, funding typically in 7–21 days, every fee disclosed in writing, and a clear plan back to a regular bank mortgage.
Written by the Mortgage Squad Advisors Editorial Team · Reviewed by the Principal Broker, FSRA #13737 · Rates & fees last reviewed August 2026. How we verify figures.
What is a private mortgage in Canada?
A private mortgage is a short-term loan secured against your property and funded by non-bank private capital — an individual lender or a Mortgage Investment Corporation (MIC). The lender underwrites your home equity rather than your income or credit, so it can fund files banks decline. It costs more, runs a short term, and works best as a planned bridge with an exit back to a bank.
A-lender vs B-lender vs private lender
Where private financing sits in the Canadian market. Figures marked * are typical and illustrative, and vary by file — see the methodology note below.
| A-lender (bank) | B-lender | Private lender | |
|---|---|---|---|
| Underwriting focus | Income, credit score & debt ratios (stress-tested) | Income + credit, more flexible on ratios and story | Home equity first; income/credit are secondary |
| Typical use case | Standard purchase, renewal or refinance | Bruised credit, self-employed, higher ratios | Bank/B decline with equity; urgent or short-term needs |
| Speed | Weeks | 1–3 weeks | Commitment often in 24–48 hours; funding typically 7–21 days |
| Rate / cost | Lowest — best-rate market | Roughly 0.5–1.5% above A pricing | Higher: typically ~7–10% (1st) / ~9–13% (2nd)* |
| Fees | Usually none to the borrower on A files | Sometimes a small lender/broker fee | Lender fee ~1–2% + broker fee ~1–2%, plus legal & appraisal* |
| Term | 1–5 year terms, 25–30 yr amortization | 1–5 year terms | Short — usually 6–18 months, often interest-only |
| LTV / equity | Up to 95% insured; 80% conventional | Up to ~80% | Typically up to ~75% (1st) / ~80–85% combined (2nd)* |
| Exit strategy | Renew or refinance at maturity | Improve file, refinance to A | Planned refinance to B/A within the term — required |
What a private mortgage actually costs — an illustrative example
The headline rate is only part of the cost. Here is a worked, illustrative example — not a quote. Your numbers depend on the loan size, position, rate, fees and term.
| Interest (10% over 12 months) | $10,000 |
| Lender fee (2%) | $2,000 |
| Broker fee (1.5%) | $1,500 |
| Legal + appraisal | $1,900 |
| Approx. total cost over 12 months | $15,400 |
Illustrative only; figures are not a quote and exclude any lender-specific charges. We disclose your exact rate, fees and total cost of borrowing in writing before you sign. Run your own numbers or ask us to model your file.
Why a rate range isn’t a quote — how private pricing is set
A private rate isn’t a sticker price; it’s priced to the risk of your specific file. The main factors that move it:
- Loan-to-value (how much equity is left after the loan)
- First vs. second position
- Property type and marketability
- Location and local market liquidity
- Loan size
- Borrower situation and income story
- Term length and whether it’s open or closed
- The strength and timing of the exit plan
The ranges on this page are typical and illustrative for Canadian private mortgages and are not an offer. Rates and fees vary by file and change with the market. Figures last reviewed August 2026.
The risks — and how we manage each one
A private mortgage is a powerful tool and a costly one. Here is the honest downside of each risk, paired with the mitigation we build into every file.
The exit plan is the product
A private mortgage without an exit is a trap. We set a concrete, written plan on day one — the specific credit, income or arrears fixes that make a B- or A-lender say yes — and track your file every quarter against it. The goal is 12–18 months in private, then a refinance into far cheaper bank financing. Anything past 24 months means a window was missed.
When a private mortgage is the right call
Real situations where equity-based private financing fits — each with the cost/risk in view and a plan to exit. No unsupported promises.
Bank decline with real equity
A strong borrower is declined on a technicality but has 40%+ equity. A private first bridges the gap while we fix the file for an A-lender refinance.
Self-employed income that won't show clean
Business-for-self income is real but understated on paper. Equity-based private financing closes now; we time the exit to two clean Notices of Assessment.
Urgent firm closing
A firm closing date the bank can't meet. A private lender can commit in 24–48 hours and fund within days, so the deal doesn't collapse.
Debt consolidation / equity take-out
High-interest debt an A-lender won't refinance. A private second consolidates it, lowering the monthly cost while credit recovers.
Power-of-sale pressure
A mortgage in default heading to power of sale. Private money clears the arrears and stops the process, buying time to refinance or sell on your terms.
Private second behind a low first
You need equity but don't want to break a low first-mortgage rate. A private second draws the equity while your prime first stays in place.
A private mortgage in practice — an illustrative case study
A composite example built from patterns common to real private-mortgage files. Figures are approximate and illustrative — not a quote, a specific client, or a guaranteed result.
- The situation
- A self-employed contractor with roughly 45% equity in their home was declined by their bank at renewal. Two strong years of business income were understated on paper after write-offs, and about $22,000 of high-interest credit-card debt had pushed their debt ratios outside bank guidelines. They needed to consolidate the debt and cover a tax bill without selling — and they wanted to keep their existing low-rate first mortgage in place.
- What we did
- Rather than refinance the whole mortgage at today's higher rates, we arranged a private second mortgage behind the existing first, sized conservatively against a fresh appraisal so equity room remained for the exit. Every fee — lender fee, broker fee, legal and appraisal — was disclosed in writing before signing. On day one we set a written exit plan: clear the credit-card balances, let the payment history and utilization recover, and file two clean Notices of Assessment to qualify for a B-lender refinance.
- Timeline
- Commitment came within about two business days of a complete application; the file funded in roughly two weeks once the appraisal and legal work were done.
- Outcome & exit
- The debt was consolidated and the tax bill cleared, and the borrower's low first mortgage stayed untouched. We reviewed the file each quarter against the exit plan. As the credit profile recovered, the goal was a refinance into lower-cost B-lender financing within the term — the standard 12–18-month path from private back toward a bank.
Illustrative only. This is a composite scenario, not a testimonial from an identified client, and does not represent a guaranteed rate, saving or outcome — your file will differ. For a deeper walk-through, read the complete private mortgage guide or compare your options in private mortgage vs. the alternatives.
Private mortgages in Ontario & the GTA
This page is our Canada-wide private-mortgage hub. Ontario borrowers can access private first and second mortgages through our FSRA-licensed brokerage (#13737), and much of our private lending is arranged across the Greater Toronto Area. For Toronto-specific market detail, local pricing context and neighbourhood examples, see our dedicated private mortgage in Toronto page. Equity-rich suburban markets come up just as often, because private lending is underwritten against the property rather than the pay stub — in a Halton city like Burlington, with a largely established homeowner base, there is usually ample security to lend against even when the income story will not pass a bank’s test; the Burlington mortgage options page sets out what we can place there. Elsewhere in Ontario? Start here and we’ll route your file to the right local lender.
Private mortgage FAQ
What is a private mortgage in Canada?
How do you qualify for a private mortgage?
What are private mortgage rates in Canada?
What fees come with a private mortgage?
How fast does a private mortgage close?
First vs second private mortgage — what's the difference?
Private mortgage vs a bank mortgage?
Private mortgage vs a B-lender?
What documents do I need for a private mortgage?
What is the minimum equity or LTV for a private mortgage?
Do private mortgages affect your credit?
Are private mortgages legal and regulated in Canada?
What happens if I can't refinance at the end of the term?
Private mortgage lending by market
Private lending is equity lending, so the property and the local market do most of the talking — the appraised value, the property form, and how quickly a home in that market would sell if the exit plan ever had to be a sale. Each hub below carries its market’s own sourced figures.