How a private mortgage works, who they're for, and the costs to weigh — a clear guide for Canadians who don't fit the bank mould. Get matched with a lender in minutes.
A private mortgage is financing from a private or alternative lender rather than a bank. These lenders focus on your home's equity more than your credit score or income documents, which makes them an option for borrowers banks turn down — at a higher cost. This guide explains how private mortgages work, who they suit, and what to watch for.
A private mortgage comes from an individual investor, a group of investors, or a mortgage investment corporation (MIC) — not a chartered bank. Because these lenders aren't bound by the same federal lending rules as banks, they can be far more flexible about who they approve, basing the decision largely on the property and your equity rather than strict income and credit requirements.
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That flexibility comes at a price: private mortgages carry higher interest rates and fees and shorter terms than bank mortgages. They're designed as a short-term bridge — a way to get financing now and move to a conventional mortgage later once your situation improves.
Private mortgages exist for borrowers who don't fit the bank mould. You might consider one if you're:
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In each case a private mortgage is a tool to solve a temporary problem — not a long-term home for your financing.
Private lenders lend against your equity, usually up to around 75–80% of the property's value, and care most about that cushion. Approvals are fast and document-light, but the terms reflect the higher risk:
Always confirm the full cost — rate plus every fee — and that the lender follows your province's mortgage rules. A licensed mortgage broker can help you compare private options and avoid overpaying.
Because a private mortgage is short-term and costly, the most important question is how you'll get out of it. A sound exit plan might be improving your credit so you qualify with a bank at renewal, increasing provable income, completing a renovation or sale, or consolidating debt to strengthen your application.
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Going in with a clear, realistic plan to move to a lower-cost mortgage — and a timeline for it — is what turns a private mortgage from a risk into a useful stepping stone.
A private mortgage makes sense when you have meaningful home equity, a temporary reason banks can't help, and a clear path back to conventional financing. It's rarely the cheapest option, so it's best used deliberately and briefly. Comparing lenders is essential, because private rates and fees vary widely.
Instead of hunting for private lenders on your own, Loanspot matches you with private and alternative mortgage options from licensed Canadian lenders so you can compare in one place. Tell us your situation and see what's available.
The questions Canadian borrowers ask most.
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A private mortgage is financing from a private investor, group of investors or a mortgage investment corporation rather than a bank. Approval is based mainly on your home's equity, with more flexibility but higher rates and fees.
Self-employed borrowers, those with bruised credit, buyers of unconventional properties, people needing to close fast, and anyone needing a short-term bridge while they work toward a conventional mortgage.
They carry higher interest rates than bank mortgages plus lender and broker fees, usually charged as a percentage of the loan. Always confirm the full cost — rate plus every fee — before signing.
Private lenders typically lend up to around 75–80% of your property's value, focusing on the equity cushion rather than strict income and credit requirements.
Terms are short, often one to two years, and many are interest-only. They're meant as a temporary bridge, so you should plan to refinance or repay before the term ends.
Because private mortgages are short and costly, you need a clear plan to move to lower-cost financing — such as improving credit, increasing provable income, or completing a sale or renovation — before the term is up.
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