Private mortgages are the lender of last resort — and that is not a criticism. When banks and B-lenders decline you, private lending keeps the door to homeownership or refinancing open. The key is understanding the costs, choosing reputable lenders, and having a clear plan to exit to cheaper financing.
When private lending makes sense
A private mortgage is appropriate when:
| Situation | Why Banks/B-Lenders Decline | How Private Solves It |
|---|---|---|
| Credit score below 500 | Below the minimum for even B-lenders | Private lenders care about equity, not credit scores |
| Active consumer proposal | Most B-lenders decline active proposals | Private lenders will approve if equity is strong |
| Recent bankruptcy (< 2 years discharged) | Too recent for institutional lenders | Private lenders look at current equity position |
| Urgent timeline | Need to close in days, not weeks | Some private lenders can fund in 3–5 business days |
| Non-standard property | Rural, mixed-use, land, unique construction | Private lenders are more flexible on property types |
| Debt consolidation emergency | Cannot refinance through A or B due to credit/income | Private second mortgage to consolidate high-interest debt |
| Bridge financing | Need short-term funds between selling and buying | Private bridge loans available for 30–180 days |
| Tax arrears on property | Lenders require tax arrears cleared before closing | Private lender can consolidate tax debt into mortgage |
How private mortgages work
Structure
| Feature | Typical Terms |
|---|---|
| Interest rate | 7.00–12.00% (first mortgage), 10.00–15.00% (second mortgage) |
| Term | 1 year (most common), some offer 2 years |
| Amortization | Interest-only payments (most common) or 25–30 year amortization |
| Maximum LTV | 65–75% (first mortgage), up to 80% combined (first + second) |
| Lender fee | 1.00–3.00% of the mortgage amount |
| Broker fee | 1.00–2.00% (sometimes included in lender fee) |
| Appraisal | Required — borrower pays ($350–$600) |
| Legal fees | Borrower pays lender’s legal fees ($1,500–$2,500) plus own lawyer |
| Prepayment | Varies — some allow open prepayment, others charge 3-month interest penalty |
| Renewal | Not guaranteed — lender may not renew, or may renew at different terms |
Interest-only vs amortized payments
Most private mortgages use interest-only payments, which means you pay less each month but do not reduce the principal:
| Payment Type | $400K Mortgage at 9% | Monthly Payment | Principal Paid After 1 Year |
|---|---|---|---|
| Interest-only | $400,000 × 9% ÷ 12 | $3,000/month | $0 (you still owe $400,000) |
| Amortized (25-year) | Standard calculation | $3,340/month | ~$7,900 |
Interest-only is more common because:
- Lower monthly payment ($340/month less in this example)
- Private mortgages are short-term — you plan to refinance within 1–2 years, so principal paydown is not the priority
- Some borrowers are in financial recovery and need the lowest possible payment
Total cost of a private mortgage
Here is the complete cost picture for a $400,000 private first mortgage at 9% for 1 year:
| Cost | Amount |
|---|---|
| Interest (12 months at 9%) | $36,000 |
| Lender fee (2%) | $8,000 |
| Broker fee (1%) | $4,000 |
| Appraisal | $450 |
| Lender’s legal fees | $2,000 |
| Your legal fees | $1,500 |
| Total cost for 1 year | $51,950 |
That is $51,950 for one year of financing. This is why private mortgages must be temporary. At renewal or within the first year, you should be working to move to a B-lender (cost drops to ~$34,000/year) or an A-lender (~$20,000/year on the same mortgage).
Top mortgage investment corporations (MICs)
MICs are pooled investment funds that lend to borrowers. They are regulated, transparent, and more professional than individual private lenders. Always prefer a MIC over an unknown individual lender.
1. Firm Capital Mortgage Fund
| Feature | Details |
|---|---|
| Type | Publicly traded MIC (TSX: FC) |
| Rate range | 7.50–11.00% |
| Maximum LTV | 75% |
| Minimum mortgage | $75,000 |
| Lender fee | 1.50–2.50% |
| Regions | Ontario, British Columbia, Alberta |
| Why it ranks #1 | One of the largest and most established MICs in Canada, transparent terms, publicly regulated, broad geographic coverage. Track record spanning decades. |
2. Fisgard Capital
| Feature | Details |
|---|---|
| Type | Private MIC (registered) |
| Rate range | 7.00–11.00% |
| Maximum LTV | 75% |
| Minimum mortgage | $50,000 |
| Lender fee | 1.50–2.50% |
| Regions | British Columbia, Alberta, Ontario |
| Why it ranks high | Competitive rates on the lower end of private lending, strong reputation in Western Canada, reasonable fees |
3. Trez Capital
| Feature | Details |
|---|---|
| Type | Private MIC (registered) |
| Rate range | 8.00–12.00% |
| Maximum LTV | 70–75% |
| Minimum mortgage | $100,000 |
| Lender fee | 2.00–3.00% |
| Regions | Major urban centres across Canada |
| Why it ranks high | Specializes in urban properties, strong with commercial-residential mixed use, experienced underwriting team |
4. CalVert Mortgage Fund
| Feature | Details |
|---|---|
| Type | Private MIC |
| Rate range | 8.00–11.00% |
| Maximum LTV | 75% |
| Lender fee | 2.00–3.00% |
| Regions | Ontario, select other provinces |
| Why it ranks high | Good mid-range private option, will consider properties and borrowers others decline |
5. Atrium Mortgage Investment Corporation
| Feature | Details |
|---|---|
| Type | Publicly traded MIC (TSX: AI) |
| Rate range | 8.00–12.00% |
| Maximum LTV | 75% |
| Minimum mortgage | $50,000 |
| Lender fee | 2.00–3.00% |
| Regions | Ontario primarily |
| Why it ranks high | Publicly traded (transparent), experienced with residential and small commercial, long track record |
Private lender comparison table
| Feature | Firm Capital | Fisgard | Trez Capital | CalVert | Atrium |
|---|---|---|---|---|---|
| Rate range | 7.50–11.00% | 7.00–11.00% | 8.00–12.00% | 8.00–11.00% | 8.00–12.00% |
| Max LTV | 75% | 75% | 70–75% | 75% | 75% |
| Min mortgage | $75,000 | $50,000 | $100,000 | Varies | $50,000 |
| Lender fee | 1.50–2.50% | 1.50–2.50% | 2.00–3.00% | 2.00–3.00% | 2.00–3.00% |
| Publicly traded | Yes (TSX) | No | No | No | Yes (TSX) |
| Best for | Broad residential | Western Canada | Urban/mixed-use | Ontario | Ontario residential |
Red flags: how to spot predatory private lenders
The private lending space is less regulated than institutional lending, which means bad actors exist. Watch for these warning signs:
| Red Flag | Why It Is Dangerous |
|---|---|
| Upfront fees before approval | Legitimate lenders deduct fees from the mortgage advance — never pay before funding |
| Pressure to sign immediately | You should always have time to review with your lawyer |
| No written commitment letter | Every term must be documented before you agree |
| Rate significantly above 12% | Above 12% for a first mortgage suggests predatory pricing or extreme risk |
| Lender fees above 4% | Combined lender and broker fees above 4–5% are excessive |
| No legal representation | The lender should have their own lawyer and you should have yours |
| Verbal promises not in writing | If the lender says “we will renew you for sure” but it is not in the commitment, it means nothing |
| Lender demands property power of attorney | Never grant anyone power of attorney over your property |
Private second mortgages
A private second mortgage sits behind your existing first mortgage and gives you access to additional equity. This is common for debt consolidation or emergency financing.
| Feature | Second Mortgage Terms |
|---|---|
| Rate | 10.00–15.00% (higher than first mortgage) |
| Maximum combined LTV | 80% (first + second mortgage combined cannot exceed 80% of property value) |
| Term | 1 year |
| Lender fee | 2.00–4.00% |
| Monthly payment | Interest-only |
Example: Your home is worth $600,000 and your first mortgage balance is $350,000 (58% LTV). Maximum combined LTV is 80% = $480,000. You could borrow up to $130,000 as a second mortgage.
When second mortgages make sense:
- Consolidating high-interest credit card debt (if the blended rate is lower than what you are paying)
- Paying off tax arrears to prevent a lien on your property
- Emergency repairs that cannot wait
- Bridging a temporary income gap
When they do not make sense:
- Ongoing lifestyle spending you cannot sustain
- Adding debt when you have no plan to repay
- If the combined cost of first + second mortgage exceeds what you can comfortably afford
Building your exit strategy
A private mortgage without an exit strategy is a trap. Before signing, you and your broker should have a written plan:
Exit path 1: Move to a B-lender at renewal (12 months)
| Action | Timeline | Goal |
|---|---|---|
| Make every mortgage payment on time | Months 1–12 | Demonstrate payment reliability |
| Get a secured credit card and use it responsibly | Month 1 | Start building/rebuilding credit history |
| Pay off or settle any remaining collections | Months 1–6 | Remove negative items from credit report |
| Save for potential B-lender fees | Months 1–12 | B-lenders charge 0.50–1.50% in fees |
| Apply to B-lenders 90 days before renewal | Month 9 | Time to get approved and arrange lawyer |
Exit path 2: Sell the property
If you cannot move to a B-lender and the private lender will not renew (or offers worse terms), selling may be the best option:
- You keep the equity you have built
- You avoid compounding private lending costs
- You can rent while rebuilding credit and try again in 1–2 years
Exit path 3: Private lender renewal (last resort)
If you must renew with the same or different private lender:
- Negotiate the renewal fee (should be lower than the original setup — push for 0.50–1.00%)
- Confirm the rate in writing before committing
- Continue your credit rebuilding plan aggressively