Are Private Mortgages in Canada Right for You? A Complete 2026 Guide
Private mortgages explained: a private mortgage is an equity-based loan funded by a private lender rather than a bank, and it has become an important financing option for Canadian homeowners who cannot qualify through traditional lenders. According to FSRA’s latest annual report on private lending, there are 65,233 private mortgages worth $32 billion in Ontario alone, representing 15.8% of all mortgages by number. As stricter lending criteria continue to create barriers, private mortgages offer a flexible, equity-based alternative for homeowners who need to move fast.
This guide answers the most common questions about private mortgages, compares your options, and helps you decide whether one is the right solution for your situation.
Private Mortgages Explained: What They Are
A private mortgage in Canada is a short-term loan secured against real estate and funded by a private individual, mortgage investment corporation (MIC), or syndicate rather than a bank or credit union. Private mortgage lenders focus on one primary factor: the equity in your property.
Unlike banks, private mortgage lenders do not require:
- A minimum credit score
- Proof of employment or income
- Passing the mortgage stress test
- Extensive documentation
Private mortgages are typically short-term solutions ranging from one to three years, designed to help homeowners stabilize their finances before transitioning back to traditional financing. If you want the full breakdown of how the product works, see our private mortgages page.
Private Mortgage Statistics: The Latest Data
Mortgage delinquency rates among non-bank lenders have been rising, driving continued demand for alternative financing solutions.
Is a Private Mortgage Right for Your Situation?
| Your Situation | Private Mortgage? | Better Alternative |
|---|---|---|
| Bad credit, strong home equity | Yes | None |
| Self-employed, cannot verify income | Yes | None |
| Facing power of sale or foreclosure | Yes, act immediately | None |
| Property tax arrears | Yes | None |
| CRA debt or lien | Yes | None |
| Strong credit, stable income | No | Bank or B lender |
| Need long-term, lowest-rate financing | No | Bank mortgage |
| Bruised credit but provable income | Maybe | Try a B lender first |
| New to Canada, limited credit history | Yes | None |
| Retired, fixed income, strong equity | Yes | None |
Who Uses a Private Mortgage?
Any homeowner with sufficient equity in their property can qualify. The most common borrowers include:
- Homeowners with bad credit or recent missed payments
- Self-employed borrowers who cannot verify income through traditional means
- Homeowners facing a power of sale or foreclosure
- Those needing to pay property tax arrears
- Borrowers with CRA debts or liens
- New Canadians with limited credit history
- Retirees or those on fixed income
- Homeowners going through separation or divorce
Private Mortgage Pros and Cons
Pros
- No minimum credit score required
- No income verification required
- No stress test
- Approvals as fast as 24 hours
- Flexible repayment structures, including interest-only options
- Can stop a power of sale or foreclosure quickly
- Can help rebuild credit through consistent payments
Cons
- Higher interest rates than banks or B lenders
- Short-term solution requiring a clear exit strategy
- Additional costs, including lender, broker, legal, and appraisal fees
- Risk of losing the property if you cannot repay at term end
What Does a Private Mortgage Cost?
The cost of a private mortgage is more than just the interest rate. Rates are higher than bank or B lender rates and vary based on your property, location, loan-to-value ratio, and the lender. Borrowers should also budget for the following fee categories:
- Lender fee, charged by the lender for arranging the mortgage
- Broker fee, which varies by deal complexity
- Legal fees, for both your lawyer and the lender’s lawyer
- Appraisal fee, paid to an independent appraiser to confirm your property value
Because every private mortgage is structured differently, pricing is set case by case. Turnedaway.ca provides a full Cost of Credit Disclosure on every file, so you see the complete cost of borrowing before you commit. We do not quote rates or fees until we have reviewed your property and situation, because an honest number is a specific one.
What Lenders Look For
Qualifying is straightforward compared to bank financing. Here is what most private lenders look for:
- Home equity. Most lenders want to see enough equity remaining after the loan, typically at least 20%.
- Property value and marketability. The property must be in a location and condition that supports the loan amount.
- Loan-to-value ratio. Private lenders arrange financing up to a maximum of 80% of the appraised value.
- Exit strategy. A realistic plan to repay or refinance the loan at term end.
Using a Private Mortgage Strategically
A private mortgage should always be a short-term bridge, not a permanent solution. Here is how to use one strategically:
Step 1. Use the funds to resolve the immediate crisis: pay arrears, discharge a lien, or consolidate high-interest debt.
Step 2. During the term, work on improving your credit score through consistent, on-time payments.
Step 3. Build or document your income over 12 to 24 months.
Step 4. Work with your broker to plan your transition to a B lender or bank at renewal.
Most borrowers who use a private mortgage strategically are able to transition to lower-cost financing within one to two years.
Real Client Examples
Case Study 1 | Mortgage Arrears
A homeowner fell behind on mortgage payments during a temporary illness, and their bank declined to help. A private home equity loan brought the mortgage current, cleared overdue property taxes, and provided working capital while they recovered and returned to work. Result: arrears cured, foreclosure avoided, and the home protected.
Case Study 2 | Debt Consolidation
A homeowner with significant equity was declined for a bank refinance because their debt-service ratios exceeded guidelines. A private mortgage consolidated their higher-interest debts into one manageable payment, with a plan to refinance back to a bank once the ratios normalized. Result: one payment instead of many, improved monthly cash flow, and a clear path back to conventional financing.
Case Study 3 | Self-Employed
An incorporated business owner was declined because legitimate deductions left their taxable income well below their real cash flow. An equity-based private loan let them consolidate business and personal debt into a single payment while they built the documentation history a bank would later need. Result: improved cash flow without inflating taxable income, and a route back to traditional lending.
Real client scenarios, anonymized for privacy. Individual outcomes vary.
Is a Private Mortgage Right for You?
A private mortgage is the right solution if:
- You have been declined by a bank or B lender
- You need fast financing and cannot wait weeks for bank approval
- Your income is difficult to verify through traditional means
- You have sufficient home equity to support the loan
- You have a clear plan to repay or refinance within one to three years
A private mortgage is not the right solution if you want long-term financing at the lowest possible rate. In that case, a bank or B lender is a better fit, and we will tell you so. Not sure how much equity you have to work with? Use our home equity loan calculator to get a rough figure before you apply.
How to Get a Private Mortgage Through Turnedaway.ca
1. Apply online or call 1-855-668-3074.
2. We assess your property equity and situation.
3. We match you with the right private mortgage lender from our network.
4. Approval as fast as 24 hours.
5. Funding in 5 to 10 business days.
Turnedaway.ca is a licensed mortgage brokerage regulated by FSRA. We pre-screen every lender in our network to protect clients from predatory terms and ensure full fee transparency on every file.
Frequently Asked Questions
What interest rate should I expect on a private mortgage in Canada?
Private mortgage rates are higher than bank or B lender rates and vary based on the lender, property, location, and loan-to-value ratio. The full cost of borrowing also includes lender, broker, and legal fees. We provide a complete Cost of Credit Disclosure on every file so you see the true cost before committing.
How long are private mortgage terms in Canada?
Most private mortgages are short-term, lasting one to three years. They are designed as temporary solutions while borrowers stabilize their finances or improve their credit before transitioning to traditional financing.
Can a private mortgage help me avoid foreclosure?
Yes. A private mortgage can provide fast access to funds to pay out mortgage arrears and stop a power of sale before it completes. Time is critical, so contact Turnedaway.ca immediately if you are facing a power of sale notice.
Are private mortgages only for homeowners with bad credit?
No. Private mortgages are also used by self-employed borrowers, new Canadians, retirees, homeowners going through divorce, and anyone who needs fast access to equity that banks cannot provide quickly enough.
Do I need an appraisal for a private mortgage?
In most cases, yes. An independent appraisal confirms your property value and determines the maximum loan amount. The appraisal is arranged through a licensed appraiser and paid by the borrower.
What happens when my private mortgage term ends?
You can renew with the same lender, refinance with a new lender, transition to a B lender or bank if your situation has improved, or sell the property. Having a clear exit strategy before you enter a private mortgage is essential.
Declined by your bank? You still have options.
We level with declined borrowers instead of overselling. If a private mortgage is not right for you, we will tell you.
Related reading: private mortgages in Canada, private mortgage lenders in Ontario, second mortgages, property tax arrears solutions, and debt consolidation using home equity.
