Private Mortgages in Ontario: When They Make Sense (and When They Don't)

Private mortgages have a reputation problem. Mention private lending and people picture loan sharks, predatory rates, and last-resort borrowers about to lose their homes. Some of that reputation is earned — there are bad actors in private lending, especially among unregulated brokers.

But for the regulated, broker-arranged side of the private market — MICs, syndicated lenders, mortgage corporations vetted by FSRA — private lending is a legitimate strategic tool. It’s the right answer for specific borrower situations and the wrong answer for others. Here’s the honest framework.

What private lending actually is

A private mortgage is just a mortgage funded by a private source of capital — not a federally regulated bank. The lenders fall into a few categories:

• Mortgage Investment Corporations (MICs): Pooled investor capital, professionally managed, regulated under provincial securities law and FSRA. Most “private” mortgages in Ontario today come through MICs.
• Syndicated lenders: Multiple investors joining to fund a single mortgage. More common for larger or commercial files.
• Individual private lenders: Wealthy individuals lending personal capital, usually through a broker. Often family money or self-directed RRSP funds.

All three are legitimate. All three are regulated to varying degrees in Ontario. None of them are loan sharks — and you should never work with anyone who isn’t operating through a FSRA-licensed broker.

When private lending is the right answer

Private lending fundamentally trades higher cost for higher flexibility. That trade is worth it when one of these is true:

1. Time pressure

Banks take 14–30+ days to fund a residential mortgage. Sometimes longer for commercial. Private lenders routinely fund in 5–10 business days, and we’ve closed in as little as 72 hours when needed.

If you’re losing a deal because financing is slipping, private bridges you to whatever permanent financing can be arranged after close. Cost: high. Alternative: lose the deal entirely.

2. Self-employed with strong financials but messy paperwork

Banks need traditional income verification: T4s, NOAs showing two years of stable income, T1 General. Many self-employed business owners legitimately earn well but show modest taxable income because their accountants do their job.

Private lenders look at bank deposits, retained earnings, and the property’s loan-to-value. They don’t insist on T4-style verification. Cost: 200–400 basis points above prime. Alternative: pay yourself an artificially high salary for two years to satisfy bank underwriting (often costs more in extra tax than the rate difference saves).

3. Bruised credit, recoverable

Recent credit hits — a missed payment cluster, a consumer proposal that just discharged, a separation that hammered the credit picture — automatically disqualify the major banks for at least 12–24 months.

Private lenders care about the property’s equity and the realistic exit. If you have a real plan to refinance back to a bank in 18 months, a private bridge during the credit recovery period often makes sense. Cost: yes. Alternative: wait two years, miss the market window, lose more money on the missed appreciation than you’d have paid in private interest.

4. Unique or non-standard property

Banks are systematically allergic to certain property types: agricultural, non-conforming zoning, properties with environmental contamination, mixed commercial/residential, properties on private roads or wells, and anything in remote areas. Even reasonable owner-occupied homes can fail bank appraisals for arbitrary reasons.

Private lenders are more flexible on property type. Cost: rate premium plus often a higher down payment requirement. Alternative: pass on the property.

5. Equity take-out when banks won’t refinance

If your debt service ratios are stretched but you have real equity in your home, a private second mortgage can let you access that equity without re-qualifying at the bank’s standards. The first mortgage stays untouched. The private second sits behind it.

This is most common for clients who need bridge capital for an investment, a renovation, a tax obligation, or to ride out a temporary income gap.

When private lending is the wrong answer

Three scenarios where we actively talk clients out of private lending:

1. You don’t have an exit strategy

The point of a private mortgage is to bridge to permanent financing — bank refinance, sale of the property, or another event that ends the private debt. If your exit strategy is “we’ll figure something out,” don’t take on private money. The cost of carrying private debt indefinitely will eat you alive.

2. The property doesn’t have enough equity

Private first mortgages typically max out at 75–80% loan-to-value. Private seconds, when stacked behind a first, can push combined LTV to 85% in some cases. Anything tighter than that and the private lender is taking real default risk — meaning rate and fee structure get expensive enough that the math stops working.

3. You can qualify at a B-lender or alt-A bank

If your file would actually approve at Equitable Bank, Home Trust, MCAP non-prime, or a credit union, that’s almost always better than private. B-lender rates run 50–150 basis points above the major banks. Private rates run 250–500 basis points above. The gap is real.

A good broker shops your file to alt-A first and only goes private if alt-A says no.

What private lending actually costs in 2026

Real numbers as of late April 2026:

First-position residential private mortgages:

• Rate: 7.5%–10% typical
• Lender fee: 1%–2% of the loan amount
• Broker fee: 0%–2% (depends on file complexity)
• Appraisal: $400–$700
• Legal: $1,500–$2,500

Second-position residential private mortgages:

• Rate: 9%–13% typical
• Lender fee: 2%–4%
• Broker fee: 1%–3%
• Same legal/appraisal costs

Term: Usually 1 year, sometimes 6 months or 2 years. Almost always interest-only payments.

On a $300,000 first private at 8% with a 1.5% lender fee and 1% broker fee:

• Up-front fees: $7,500
• Monthly interest: $2,000
• Annual interest: $24,000
• Total year-one cost of capital: $31,500 (10.5% effective APR)

That’s expensive. It’s also fast, flexible, and available when banks aren’t.

The exit plan matters more than the rate

The biggest mistake we see in private lending isn’t taking the loan — it’s failing to plan the exit. A private mortgage works when there’s a credible path back to bank financing in 12–18 months. That path might be:

• Credit score recovery from 580 to 680
• Income stabilization (two full years of self-employment showing on tax returns)
• Property renovation completing (raising appraised value)
• Sale of another asset paying down the principal
• Refinance to an alt-A B-lender after one clean year of payment history

Without a plan, you’ll renew the private mortgage in year two, pay the renewal fees, and renew it again in year three. That’s how short-term private debt becomes long-term debt that bleeds the property.

How we approach private lending at Tripoint

Three steps, every time:

1. Triage: Is private actually the answer, or is there a cheaper alt-A solution we’re missing?
2. Cost transparency: Every fee disclosed before any application is submitted. No surprises at signing.
3. Exit plan: Documented in writing. We follow up at 6 months, not 11.5 months, to make sure the bank refinance is actually moving.

If you’re considering a private mortgage, the right first step is a conversation that starts with “is this even necessary?” Sometimes the answer is yes. Often it isn’t.