The words, “private mortgage” make a lot of people nervous. Picture a guy in a back room with a cigar and a payment schedule written on a napkin. Not quite. Private mortgages are a legitimate, regulated part of the lending landscape, and every year they help thousands of good people get through a tight spot, close a deal the banks wouldn’t touch, or buy themselves the time they need to get back on their feet. You need to know when private money is the proper instrument, what it really costs, and how to get in and out cleanly.

Here’s what I’ll cover:

• What Is a Private Mortgage
• Private Lender Characteristics
• Who Are the Private Lenders?
• Rates and Fees: What Speed and Flexibility Cost
• How Private Lenders Approve a Mortgage
• The Mortgages Private Lenders Say Yes To
• The Mortgages Private Lenders Turn Down
• How Private Lenders Stack Up Against Prime and Alternative Lenders
• The Problems a Private Mortgage Solves
• Who Makes the Ideal Private Mortgage Candidate?
• A Story From the Kitchen Table
• Putting It to Work: Tips for Realtors and Clients
• How I Can Help You Use Private Money the Smart Way
• Allen’s Final Thoughts

What Is a Private Mortgage

A private mortgage is a loan secured against real estate that comes from a private source of money instead of a bank, credit union or other deposit-taking institution. The lender might be an individual investor, a group of investors, or a company that pools investor money specifically to lend on property. What they all have in common is that they’re lending their own capital, or their investors’ capital, not your neighbour’s chequing account deposits.

That one difference changes everything. Because private lenders aren’t bound by the federal stress test or the same underwriting rulebook as the banks, they can make decisions based on common sense and the strength of the property. Can you carry the payments for a year? Is there enough equity in the home to protect the loan? Do you have a believable plan to pay it back? If the answers are yes, there’s a good chance a private lender can help, even when the bank has already shown you the door.

In highway terms, prime lenders are the express lanes, and alternative lenders are the collector lanes. Private lenders are the on-ramp that gets you moving when the highway is jammed solid. You’ll pay a toll for using it, but sometimes that toll is the cheapest way to get where you need to go.

Private Lender Characteristics

Here’s what makes a private lender different:

• They lend on equity first. The property is the star of the show. Lenders want a solid cushion of equity, so the loan is usually kept to roughly 75% to 80% of the home’s value, sometimes less for unusual properties.
• They care about the exit, not just the entry. Every private lender wants to know how you’ll pay them back: a refinance, a sale, an inheritance, a business payout. No exit, no deal.
• They’re fast. Approvals can come together in a day or two, and funding in under a week when the paperwork is clean.
• They’re flexible. Bruised credit, tax arrears, unusual income or a quirky property won’t necessarily kill the deal.
• They lend short-term. Most private mortgages run 6 to 12 months, sometimes up to 24 or 36, and are usually renewable if the plan needs a bit more time.
• They often charge interest-only payments. That keeps the monthly cost down while you work on your exit plan.
• They’ll lend in first or second position. A private lender can be your only mortgage, or they can sit behind your existing bank mortgage as a second (or even third) mortgage.
• They charge fees. Unlike most prime lenders, private lenders charge a lender fee, and the brokerage arranging the deal usually earns a fee too.
• They’re not the Wild West. In Ontario, private mortgage deals are arranged through brokerages licensed by FSRA, the province’s financial services regulator, and you receive written disclosure of your full cost of borrowing before you sign.

Who Are the Private Lenders?

Private lenders aren’t really “institutions” in the way banks are. They’re a mix of players, big and small, and each one has its own risk appetite. Here’s who’s in the game:

• Individual private investors. Retirees, business owners and professionals who want to earn a steady return secured by real estate. Many lend locally, so they know the neighbourhoods they’re lending in.
• Mortgage Investment Corporations (MICs). These are companies that pool money from many investors and lend it out as mortgages. Larger MICs operate like well-oiled machines, with underwriters, set lending criteria and consistent pricing. They’re one of the most common sources of private money in Ontario.
• Private lending companies and funds. Professionally managed funds and lending firms that specialize in short-term real estate loans, from residential bridge loans to construction and land financing.
• Syndicates of investors. Several investors each fund a slice of one larger mortgage. These are common on bigger residential or commercial deals and are arranged and administered through licensed brokerages.
• Family offices and wealthy families. Some lend directly on larger or more complex deals where they like the property and the story.

Not all private money is priced the same. A big MIC with deep pockets may be cheaper and more predictable, while an individual investor may be more flexible on a strange property or a tricky story. Part of my job is knowing which one fits your situation.

Rates and Fees: What Speed and Flexibility Cost

Private money costs a lot more. You’re paying for speed, flexibility and the lender taking on a risk the banks won’t. But when you understand the numbers, you can make a smart decision instead of a scared one.

Here’s the breakdown in today’s market:

• Interest rate: private first mortgages often land somewhere in the high single digits to around 12%, while second mortgages typically run higher than firsts. Where you land depends on your equity, the property, the location and the overall risk.
• Lender fee: commonly around 2% of the loan amount, sometimes more on higher-risk deals.
• Brokerage fee: often in the same neighbourhood as the lender fee.
• Other costs: legal fees (you’ll need your own lawyer), an appraisal, title insurance, and a discharge fee when the mortgage is paid out.

Assume you borrow a $150,000 second mortgage at 10% interest-only for 12 months, with 2% lender and 2% brokerage fees. Your monthly interest is about $1,250, and your up-front fees are about $6,000. Over the year, that’s roughly $21,000 all in. That sounds like a lot until you compare it to the alternative: losing the house to a power of sale, losing a $40,000 deposit on a deal that can’t close, or paying 20%-plus on credit cards and tax arrears with penalties piling up.

The way I see it, the right question isn’t “Is private money expensive?” Of course it is. The right question is “Does it cost less than the problem it solves?” When the answer is yes, and there’s a clear way out, a private mortgage can be the best money you ever spend.

How Private Lenders Approve a Mortgage

Private lenders are ‘document light’ especially when compared to alternative and prime lenders. Instead of feeding your file into a computer that spits out yes or no based on your debt ratios, a real person looks at the whole picture. The process usually goes like this:

1. The deal summary. I put together a clear snapshot of your situation: the property, the amount you need, why you need it, and how you plan to pay it back. A good summary gets a good lender’s attention fast.
2. Property value check. The lender wants to know what the property is really worth. That usually means a recent appraisal, plus a look at location, condition and how easy it would be to sell.
3. Loan-to-value calculation. The lender adds up every mortgage on the property, including the new one, and compares it to the value. Most want the total to stay at or below roughly 75% to 80%, with less for rural, unusual or hard-to-sell properties.
4. Exit strategy review. This is the big one. The lender wants a believable plan: refinancing with a prime or alternative lender once your credit or income is sorted, selling the property, or paying out from a known future event.
5. Ability to carry. Even though the lender won’t run a formal stress test, they still want comfort that you can make the payments. Some will accept prepaid interest held back from the loan if cash flow is tight.
6. Credit and background review. They’ll look at your credit, not to disqualify you, but to understand the story. Arrears, liens and judgments all need to be disclosed and accounted for.
7. Commitment and disclosure. You receive a commitment with the rate, fees, term and conditions, plus the cost of borrowing disclosure required in Ontario. Read it carefully, and ask me anything.
8. Independent legal advice and funding. Your lawyer reviews the documents with you, registers the mortgage, and the funds are advanced. On a clean file, that whole journey can take days, not weeks.

Notice the difference from the banks? A prime lender approves you first and the property second. A private lender flips that around: the property and the exit plan come first, and your personal profile fills in the rest of the picture.

The Mortgages Private Lenders Say Yes To

Private lenders are open to a lot of deals that make a bank underwriter break out in a cold sweat. These are the deals they’ll happily look at:

• Second mortgages behind a bank mortgage. Tap into your equity without breaking your low-rate first mortgage and paying a hefty penalty.
• Bridge financing. Buying your next home before your current one sells, when your bank can’t offer a bridge loan.
• Debt consolidation for bruised credit. Rolling high-interest debts into one payment so you can stop the bleeding and start rebuilding.
• Tax arrears payouts. Clearing CRA debt or property tax arrears before they turn into liens or worse.
• Mortgage arrears and power of sale situations. Catching up missed payments and stopping a forced sale while there’s still equity to protect.
• Self-employed and hard-to-document income. Borrowers whose real income doesn’t show up neatly on a tax return.
• Recent credit events. A consumer proposal or bankruptcy that’s recently discharged or still being paid.
• Unique and rural properties. Larger acreages, hobby farms, homes needing major repairs, or properties outside the box of most lenders.
• Construction and renovation financing. Funding a build, a major reno or a flip, often with draws released as work is completed.
• Quick closings. Deals that need to close in days, not weeks, including estate sales and power-of-sale purchases.
• Investor and commercial deals. Rentals with irregular income, mixed-use buildings and land, depending on the lender.

The Mortgages Private Lenders Turn Down

Private lenders say no too, and sometimes they say it faster than the bank. A good private lender is protecting their investors’ money. They will say no when:

• Not enough equity. If the total of all mortgages would push past what the lender is comfortable with, usually around 75% to 80% of value, it’s a hard pass in most cases.
• No realistic exit strategy. “I’ll figure it out later” isn’t a plan. If there’s no believable path to pay off the loan, a reputable lender won’t touch it.
• Can’t carry the payments at all. If you have no way to make even interest-only payments and no equity to prepay them, borrowing more just digs the hole deeper.
• Hard-to-sell properties. Very remote locations, tiny markets with few comparable sales, or properties with serious environmental contamination.
• Title and legal problems. Unclear ownership, disputes between owners who won’t sign, or multiple liens that can’t be sorted out.
• Properties with illegal use or significant damage from it, such as a former grow-op that hasn’t been properly remediated.
• Deals that just don’t add up. Inconsistent stories, missing documents or anything that smells like fraud. Honesty matters more in private lending, not less.
• Long-term “forever” financing. Private money is designed to be short-term. If you need a 25-year mortgage and can’t qualify anywhere else, a private lender isn’t the long-term answer.

How Private Lenders Stack Up Against Prime and Alternative Lenders

	Prime lender	Alternative lender	Private lender
Who they are	Banks, monolines, credit unions	Trust companies, alternative programs at regulated lenders	Individuals, MICs, funds, syndicates
Typical rate	Lowest in the market	Roughly 1–3% above prime	High single digits to low double digits
Fees	Usually none	Lender fee, often around 1%	Lender + brokerage fees, often ~2% each
Approval focus	Income, credit, debt ratios	Overall story with some flexibility	Equity and exit strategy
Stress test	Yes (federally regulated)	Usually some form of qualifying test	No formal stress test
Credit	Good to excellent	Bruised can work	Secondary to equity
Equity needed	From 5% down with insurance	Usually 20%	Typically 20–25%+
Typical term	1–10 years, 5 most common	1–3 years	Often 6–12 months
Payments	Amortized	Amortized	Often interest-only
Speed to fund	Weeks	One to a few weeks	Days to a week
Best for	Strong, standard files	Rebuilding or non-traditional files	Short-term fixes and urgent needs

These figures are ballpark ranges, not quotes. Every file and every lender is different.

Let’s compare: Prime lenders reward a perfect file, alternative lenders give an imperfect file room to breathe, and private lenders solve problems the other two can’t, quickly and on the strength of your property. Each lane has its place, and the smartest borrowers know how to move between them.

The Problems a Private Mortgage Solves

This is a list of the most common problems I see private money fixing:

• Stopping a power of sale. When mortgage payments have fallen behind and the lender has started the legal process, a private mortgage can pay out the arrears, save the home and preserve years of equity.
• Clearing CRA and property tax arrears. Tax debt grows quickly with interest and penalties, and it can block a bank refinance. Private money can clear it in one shot.
• Bridging a purchase before a sale. You’ve bought your next home, but your current one hasn’t sold yet and your bank can’t offer a bridge loan. A short private loan fills the gap.
• Saving a deal that’s about to collapse. A buyer’s financing falls through days before closing. Private money can get the deal across the finish line and protect the deposit.
• Buying out a spouse after separation. When one partner wants to keep the home but can’t yet qualify with a bank on their own income, private money can buy the time to get there.
• Settling an estate. Heirs who need to pay out siblings, cover taxes or fix up a property before selling can use private funding to keep things moving.
• Consolidating crushing debt. Swapping a pile of 20%-plus credit card and loan payments for one manageable mortgage payment, with a plan to rebuild credit and refinance.
• Funding renovations or construction. Getting a project finished so the property can be refinanced or sold at its full value.
• Handling a non-renewal. When your lender won’t renew at maturity, private money can keep you in your home while we fix whatever caused the problem.

Who Makes the Ideal Private Mortgage Candidate?

A private mortgage isn’t for everybody, and it isn’t a forever solution for anybody. But if you see yourself in most of this list, private money might be exactly what you need right now:

• You have solid equity in your property, usually at least 20% to 25% after the new loan.
• You’re dealing with a short-term problem, not a permanent one.
• You have a clear exit strategy, like a refinance in 12 months, a property sale or a known future payout.
• Your credit or income doesn’t fit the banks’ box right now, but your story makes sense to a reasonable person.
• You need speed that the banks simply can’t deliver.
• You can handle the payments, or you have enough equity to prepay interest for the term.
• You’ve done the math and the private mortgage costs less than the problem it solves.

The best private mortgage candidate goes in planning their way out. From day one, we should know what needs to happen to get you back into the alternative or prime lane, and when.

A Story from the Kitchen Table

Let me tell you about Mark and Sheila. (Names and details changed, but you might know a couple just like them.)

Mark ran a small landscaping company out of Coburg. Sheila worked part-time at a dental office. For years, life was good. Then a couple of big clients paid late, one went under owing Mark a pile of money, and the business hit a wall. To keep his crew paid, Mark fell behind on his HST remittances and his personal taxes. Then, to keep the lights on at home, they missed a few mortgage payments.

By the time they called me, the bank had sent a notice of sale. CRA had registered a lien. Their credit had taken a beating. Sheila told me later that she hadn’t slept properly in two months. They’d already tried their bank and two others. The answer was the same everywhere: no.

Here’s what the banks couldn’t see. Mark and Sheila had owned their home for fourteen years. It was worth about $850,000, and they only owed around $430,000 on it. That’s a lot of equity. Better yet, Mark’s business had already turned the corner. He’d landed two municipal maintenance contracts for the new season, and the deposits were showing up in his business account.

We sad down and built a plan. A private lender, a well-established MIC I work with regularly, approved a second mortgage of $170,000 at an interest-only rate for 12 months. That brought their total borrowing to about 71% of the home’s value, comfortably inside the lender’s limit. The money paid out the mortgage arrears and the legal costs, cleared the CRA debt and released the lien, and wiped out about $35,000 in credit card balances. We also held back a few months of prepaid interest so they had breathing room while the new contracts ramped up.

The notice of sale was withdrawn. The phone stopped ringing with collection calls. And Mark and Sheila had a written plan: make every payment on time, file the business taxes properly, and let their credit heal for a year.

Fourteen months later, after a short renewal to let Mark file his latest tax return, we refinanced the whole thing with an alternative lender at a much lower rate, paid off the private second, and rolled everything into one amortized mortgage. Their next stop is a prime lender at their next renewal.

When we signed the refinance papers, Sheila handed me a jar of homemade strawberry jam and said, “This is the first time in a year and a half I don’t feel like I’m drowning.” That’s why I do this work.

The lesson? A private mortgage didn’t fix Mark and Sheila’s problems on its own. The plan did. Private money just bought them the time and space to carry it out.

Putting It to Work: Tips for Realtors and Clients

Knowing how private money works is one thing. Putting it to work to save a deal or rescue a family’s finances is where it really pays off.

For realtors

• Keep a private-money plan in your back pocket for every closing. When a buyer’s financing falls apart at the last minute, a quick call to me can often line up private funding to close on time and protect the deposit. That’s a deal saved and a client for life.
• Use private bridge financing to win the house first. Buyers who must sell before they buy can lose the home they want. A short private bridge loan lets them buy now and sell on their own timeline, without accepting a lowball offer.
• Spot the distressed seller early. If a listing client is behind on payments, under a notice of sale or carrying tax arrears, a private refinance might let them stabilize and sell for full market value instead of taking a fire-sale price.
• Help unique properties sell. Listing a hobby farm, a fixer-upper or a property that banks won’t finance? Private lenders can open the door to more buyers, which can mean a better sale price.
• Never let “private” be a dirty word with your clients. Frame it the way it should be: a short-term tool with a clear exit, not a trap.

For clients

• Call early, not at the last minute. The more time we have, the more options we have, and the better the rate and terms usually are. If you’re missing payments or have a tax problem brewing, don’t wait for the legal letter.
• Know your exit before you sign. Ask yourself: how and when will I pay this off? If you can’t answer that, we’ll work it out together before moving ahead.
• Compare the cost to the problem. Put the total cost of the private mortgage side by side with what happens if you do nothing. That’s the real comparison.
• Read your disclosure and get real legal advice. In Ontario, you’ll receive a cost of borrowing disclosure. Review it with your own lawyer, and make sure you understand the rate, fees, term, renewal terms and what happens if you pay early.
• Protect your rebuild. Pay every payment on time, file your taxes, and don’t pile up new debt while you’re in a private mortgage. That’s your ticket back to cheaper money.
• Don’t stay longer than you need to. Private money is the on-ramp, not the highway. The sooner you can move into an alternative or prime mortgage, the more money you keep.

This is how to line up a private mortgage the right way, from start to finish:

1. Tell me the full story: what’s going on, how much you need, and by when. No surprises later means a smoother deal.
2. Gather your basics: a recent mortgage statement, property tax bill, ID, and any notices from your lender or CRA.
3. Book an appraisal so we have a reliable value to work with.
4. Together, map out your exit strategy and how long you’ll realistically need the private loan.
5. I’ll shop the deal to suitable private lenders and bring you the best options, with the full cost laid out in plain English.
6. Review the commitment and the cost of borrowing disclosure, then sign with your lawyer after getting independent legal advice.
7. Once funded, follow the plan: make your payments, clean up your credit, and stay in touch so we can refinance out on schedule.

How I Can Help You Use Private Money the Smart Way

A private mortgage can be a lifesaver or a costly mistake, and the difference is almost always in the planning. That’s where I come in, and it’s a part of my work that I take very seriously.

I work with a wide network of lenders: established MICs, private lending funds, individual investors, alternative lenders and prime lenders. That means I’m not just looking for any private loan. I’m looking for the right one for you, and the right way out of it. Here’s what I can do for you:

• I take an honest look at your situation. Sometimes private money is the best answer. Sometimes an alternative lender, a credit union or a different strategy will cost you less. I’ll tell you straight, even if the answer is “you don’t need private money.”
• I shop the market for you. Private pricing varies a lot. I’ll bring your file to lenders who suit your property and story, so you’re not paying more than you need to.
• I lay out the full cost in plain language. Rate, fees, legal costs, renewal terms, prepayment options. No fine-print surprises.
• I build your exit plan from day one. Together, we’ll map out what needs to happen to get you back into an alternative or prime mortgage, and when.
• I move fast when it counts. When a closing is at risk or a notice of sale is ticking, I know how to get a clean file in front of the right lender quickly.
• I partner with your realtor, lawyer and accountant. Everyone pulling in the same direction means fewer delays and better outcomes.
• I stay with you after funding. I’ll check in as your term progresses and handle the refinance when you’re ready to move up.
• I bring specialty experience to the table. Reverse mortgages for homeowners 55-plus can sometimes replace a private loan for older homeowners, and I also work on senior housing transitions, commercial deals, renewals and refinances.

Whether you’re facing a tax bill that won’t wait, a closing that’s about to slip, or a lender who’s stopped returning your calls, you don’t have to sort it out alone

Allen’s Final Thoughts

A private mortgage is a short-term loan from private investors, MICs or lending funds, secured by your property and approved mainly on your equity and your exit plan. It costs more than prime or alternative lending, with higher rates, lender and brokerage fees, and short, often interest-only terms. In exchange, you get speed, flexibility and a yes when the banks say no.

Private money is the right tool for stopping a power of sale, clearing tax arrears, bridging a purchase, saving a collapsing deal, buying out a spouse or financing a property the banks won’t touch. It’s the wrong tool when there’s no equity, no exit or no way to carry the payments. The best private mortgage is the one you go into with a plan and come out of on schedule, one step closer to the cheapest money in the market.

If you think private money might be part of your next move, let’s talk it through together before you sign anything.