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How Do Private Mortgages Work in Ontario?
Private mortgages can help people who don’t fit the strict rules of traditional banks—like those who are self-employed, have bruised credit, or need quick financing.
Let’s break down how they work and when they might be the right fit for you.
What Is a Private Mortgage?
A private mortgage is a home loan from a private lender—an individual, a group of investors, or a mortgage company—not a traditional bank or credit union.
Instead of focusing only on your income or credit score, private lenders care most about:
- The value of your property
- The amount of equity you have
- Your plan to repay or refinance later (called an exit strategy)
Because of this, they can make decisions much faster and are often more flexible than banks.
How a Private Mortgage Works
Here’s what usually happens when you apply for a private mortgage in Ontario:
- Application & Appraisal - You or your mortgage agent (Contact us) provide property details, income info, and your goals. The lender orders an appraisal to confirm your home’s market value.
- Loan-to-Value (LTV) Review - Most private lenders will lend up to 75–80% of your home’s value. Use our Home Equity Calculator to whether your property has enough equity for you to tap into.
- Approval & Terms - Once approved, you’ll get an offer showing the loan amount, interest rate, and fees. Private mortgages are usually short-term (6 months to 3 years).
- Funding - After signing, funds can be released within days, not weeks—especially helpful for urgent situations like paying off debts, avoiding power of sale, or funding renovations.
When a Private Mortgage Makes Sense
Private mortgages can be a smart choice when:
- You’re self-employed and can’t prove income traditionally
- You have credit challenges but good home equity
- You need short-term financing for investment or business use
- You’re waiting to sell a property or refinance later
- You need debt consolidation or want to catch up on property taxes
The Costs and Terms
Private mortgages often have:
- Interest rates between 7%–13% (depending on risk and position)
- Lender and broker fees (usually built into the loan)
- Shorter terms, meant to give you time to rebuild or refinance
Even though they cost more than bank mortgages, they often save clients thousands by preventing missed payments, credit damage, or power of sales.
The Exit Strategy
Because private loans are short-term, it’s important to have a clear exit plan—for example, selling a property, improving credit, or moving back to an A or B lender within a year or two.