Private Mortgage Ontario: Complete Guide (2025)
By youcanqualify - Licensed Ontario Mortgage Brokers specializing in private lending
A private mortgage can unlock your home's equity when traditional banks say no. Whether you have bad credit, are self-employed, or need quick funding, private mortgages in Ontario offer flexible alternatives with approval in as little as 1-3 days.
This comprehensive guide covers everything Ontario homeowners need to know about private mortgage lenders, including costs, requirements, the application process, and whether a private mortgage is the right option for your situation. We'll also explain how to find reputable private mortgage lenders in Ontario and what to expect throughout the process.
Quick Summary: Private Mortgages Ontario
- ✓ Interest Rates: 8-15% annually
- ✓ Approval Time: 1-3 days
- ✓ Max LTV: Up to 85% of property value
- ✓ Credit Score: Not required
- ✓ Term Length: 6-12 months typically
- ✓ Funding Speed: 5-7 days to receive money
Private Mortgage vs Bank Mortgage: Quick Comparison
| Feature | Private Mortgage | Bank Mortgage |
|---|---|---|
| Interest Rate | 8-15% | 5-7% |
| Approval Time | 1-3 days | 2-4 weeks |
| Credit Score Required | Not required | 650+ required |
| Maximum LTV | Up to 85% | Up to 95% |
| Typical Term | 6-12 months | 5 years |
| Income Verification | Flexible | Strict documentation |
| Self-Employed Friendly | Yes | Difficult |
| Bad Credit Accepted | Yes | No |
What is a Private Mortgage in Ontario?
A private mortgage is a loan secured by real estate, funded by private mortgage lenders—individuals, companies, or investment groups—rather than traditional banks or credit unions. In Ontario, private mortgages have become a popular alternative for homeowners who don't qualify for conventional financing due to credit issues, self-employment, or unique property types.
Private lenders in Ontario operate under regulations set by the Financial Services Regulatory Authority (FSRA) and must comply with the Mortgage Brokerages, Lenders and Administrators Act, ensuring consumer protection.
Key Characteristics of Private Mortgages:
🏠 Equity-Based Approval
Private lenders focus on your property's value and equity, not your credit score or income documentation. As long as you have sufficient equity (typically 15-20% or more), you can qualify.
💰 Higher Interest Rates
Private mortgage rates in Ontario range from 8-15% annually, reflecting the increased risk private lenders take compared to banks. First position mortgages (8-12%) are cheaper than second position mortgages (10-15%).
⏰ Short Terms
Most private mortgages are 6-12 month terms, designed as bridge financing or to solve temporary credit issues. They're not meant to be permanent solutions but rather stepping stones to traditional financing.
⚡ Quick Approval & Funding
Decisions in 1-3 days, funding within 5-7 days—much faster than traditional mortgages that take 2-4 weeks. Some private lenders can even close in 3-5 days for urgent situations.
Types of Private Mortgages in Ontario:
📍 1st Position Private Mortgage
The primary mortgage on the property. If you default, this lender gets paid first from the property sale. Because of lower risk, rates are typically 8-12%. Best for homeowners with no existing mortgage or those refinancing their only mortgage.
📍 2nd Position Private Mortgage
A secondary mortgage behind your existing first mortgage (also called a second mortgage). Higher risk for lender means higher rates of 10-15%. Perfect when you need additional funds but don't want to refinance your low-rate first mortgage.
When Do You Need a Private Mortgage in Ontario?
Private mortgages serve Ontario homeowners in specific situations where traditional banks won't lend. Here are the most common scenarios where private mortgage lenders can help:
❌ 1. Bad Credit or Bankruptcy
Banks typically require credit scores of 650+. Private mortgage lenders in Ontario will approve you even if you have:
- Recent bankruptcy or consumer proposal (even if just discharged)
- Credit score below 600 or no credit history
- Multiple late payments, collections, or charge-offs
- Tax liens, judgments, or CRA debt
- Previous foreclosure or power of sale
💡 Key Point: Private lenders don't focus on credit history—they care about your property equity. As long as you have 15-20%+ equity, you can qualify.
💼 2. Self-Employed Income
Traditional lenders require 2 years of tax returns and Notices of Assessment. Private lenders offer flexibility if you:
- Recently started your business (less than 2 years of operation)
- Have fluctuating or seasonal income
- Write off significant business expenses, reducing taxable income
- Can't provide traditional income documentation (T4s, pay stubs)
- Work as independent contractor or gig worker
Real Example: Maria runs a successful consulting business making $120K/year, but after business deductions her tax returns show only $45K. Banks declined her. A private lender approved her based on her $380K in home equity, not her stated income.
⚡ 3. Quick Closing Required
Need funding urgently? Private mortgages in Ontario close in 5-7 days for:
- Power of sale or foreclosure prevention (stop the process immediately)
- Time-sensitive property purchases with tight closing dates
- Emergency financial needs (medical bills, legal fees, business crisis)
- Competing offers requiring fast closes to secure the property
- Bridging gap between selling old home and buying new home
Success Story: John was 48 hours away from losing his $650K Toronto home to power of sale. A private lender approved and funded his $180K mortgage in 4 days, saving his home.
🏚️ 4. Unique or Non-Conforming Properties
Banks won't mortgage certain property types. Private mortgage lenders will consider:
- Rural properties without municipal services (well water, septic)
- Properties requiring major repairs or renovations
- Mixed-use buildings (residential + commercial space)
- Properties with zoning issues or non-conforming use
- Raw land, acreages, or hobby farms
- Properties with legal issues (estate sales, probate)
- Tiny homes, mobile homes, or unusual constructions
💳 5. Debt Consolidation
Use home equity to consolidate high-interest debt when banks say no:
- Credit card debt at 19-29% interest rates
- Payday loans at 400%+ APR
- CRA tax debt with penalties accumulating
- Multiple creditors and collection agencies
- Vehicle loans at 8-12%
💰 Real Cost Comparison:
Scenario: $40,000 in credit card debt at 22% interest
❌ Keeping credit cards: $8,800/year in interest
✅ Private mortgage at 12%: $4,800/year in interest
💵 Annual Savings: $4,000 while rebuilding credit
🏗️ 6. Real Estate Investment
Investors use private mortgages to:
- Purchase fixer-uppers banks won't finance
- Bridge financing for property flips
- Quick closes on investment opportunities
- Fund renovations before refinancing to traditional mortgage
Calculate Your Private Mortgage Options
See how much equity you have and what private mortgage options are available to you in Ontario.
Check My Equity & Options →Private Mortgage Costs in Ontario (2025)
Understanding the true cost of a private mortgage is crucial for making informed decisions. Here's the complete breakdown of all fees and costs you'll encounter when working with private mortgage lenders in Ontario:
📊 1. Interest Rates (8-15% annually)
Private mortgage rates in Ontario vary based on several factors:
First Position Mortgages: 8-12%
- 65% LTV or less: 8-9%
- 66-75% LTV: 9-11%
- 76-85% LTV: 11-12%
Second Position Mortgages: 10-15%
- Combined LTV under 75%: 10-12%
- Combined LTV 75-85%: 12-15%
LTV (Loan-to-Value) = Total mortgage amount ÷ Property value × 100
💵 2. Lender Fees (2-4% of loan)
Most private lenders charge an upfront fee, also called a "setup fee" or "administrative fee":
- Standard: 2-3% of loan amount
- Rush processing: 3-4% of loan amount
- Complex situations: 3-4% of loan amount
Example:
$200,000 loan × 3% fee = $6,000 lender fee (deducted from loan proceeds)
🤝 3. Broker Fees (1-2%)
If you use a mortgage broker to find private mortgage lenders Ontario, they typically charge 1-2% of the loan amount. Many brokers are paid by the lender instead, costing you nothing.
⚖️ 4. Legal Fees ($1,500-$3,000)
You'll need a real estate lawyer to handle the mortgage documents:
- Simple mortgage: $1,500-2,000
- Complex situations: $2,000-3,000
- Includes title search, registration, and disbursement
🏘️ 5. Property Appraisal ($300-$500)
Private lenders require a professional appraisal to confirm property value. Cost varies by property size and location.
💰 Total Cost Example
Scenario: $200,000 private mortgage at 12% for 12 months
Note: Most private mortgages are interest-only payments. Principal is due at end of term when you refinance to traditional mortgage or sell property.
How to Get a Private Mortgage in Ontario (5 Steps)
Getting a private mortgage is faster and simpler than traditional mortgages. Here's the complete process:
Get Property Appraisal & Assess Equity
Determine your property's current market value and calculate available equity:
- Order professional appraisal ($300-500)
- Or use our free equity calculator for quick estimate
- Calculate: Property Value - Existing Mortgages = Available Equity
- Lenders will loan up to 85% LTV (15% equity minimum required)
Find Private Mortgage Lenders Ontario
Connect with reputable private lenders through:
- Mortgage Brokers: Have access to multiple private lenders (recommended)
- Direct Private Lenders: Institutional private lending companies
- Private Investors: Individual investors (higher risk, less regulated)
- Online Platforms: Websites like youcanqualify connect you with vetted lenders
Submit Application & Documents
Private mortgage applications are much simpler than bank applications:
Required Documents:
- Property address and estimated value
- Copy of existing mortgage statement
- Government-issued ID
- Proof of property ownership (tax bill or deed)
Often NOT Required:
- Credit check (though some lenders will pull it)
- Income verification (pay stubs, tax returns)
- Employment letters
Receive Approval (1-3 Days)
Private lenders in Ontario approve quickly because they focus on property value, not your credit:
- Initial approval: Often same day
- Full approval: 1-3 business days
- Rush approvals: Possible in 24 hours for emergencies
- Receive commitment letter outlining terms, rate, and fees
Complete Legal Work & Receive Funds (5-7 Days)
Final steps before receiving your money:
- Hire real estate lawyer (lender may recommend one)
- Lawyer reviews and prepares mortgage documents
- Sign mortgage agreement and closing documents
- Lawyer registers mortgage on property title
- Funds deposited to your account (usually 5-7 days from approval)
🎉 You're Done! Money is in your account.
Total timeline: 7-10 days from application to funded
Finding Private Mortgage Lenders in Ontario
Choosing the right private mortgage lender is crucial. Here's how to find reputable lenders and what to look for:
Types of Private Mortgage Lenders
✅ Institutional Private Lenders (Recommended)
Registered companies with established track records:
- Regulated by FSRA
- Transparent fees and terms
- Professional processes
- Lower interest rates (8-12%)
- Examples: Mortgage investment corporations (MICs)
✅ Private Mortgage Brokers (Recommended)
Licensed brokers with access to multiple lenders:
- Shop multiple lenders on your behalf
- Get you best rates and terms
- Handle paperwork and coordination
- Often paid by lender (free to you)
- Licensed and regulated professionals
⚠️ Individual Private Investors (Use Caution)
Private individuals lending their own money:
- Less regulated
- Higher interest rates (12-15%+)
- Terms may be less favorable
- Always use a lawyer to review terms
🚩 Red Flags to Avoid
Watch out for these warning signs of predatory private lenders:
- Upfront fees before approval: Legitimate lenders don't charge fees until closing
- Pressure tactics: "This rate expires today" or similar urgency
- Unusually high rates: Over 18% is predatory
- No written agreement: Everything must be in writing
- Unlicensed brokers: Always verify licensing with FSRA
- No lawyer required: Legitimate lenders require independent legal advice
❓ Questions to Ask Private Lenders
- 1."What is your total interest rate and are there any hidden fees?"
- 2."What is the lender fee and when is it charged?"
- 3."Are there prepayment penalties if I refinance early?"
- 4."What happens if I can't refinance at end of term?"
- 5."Are you licensed with FSRA? Can I verify?"
- 6."Can you provide references from past clients?"
Where to Find Reputable Lenders
- • Online platforms: Websites like youcanqualify connect you with vetted lenders
- • Mortgage broker associations: Search FSRA's registry of licensed brokers
- • Real estate lawyers: Often have relationships with reputable lenders
- • Real estate agents: Can recommend mortgage brokers who work with private lenders
- • Referrals: Ask friends, family, or business associates who've used private financing
Private Mortgage Pros & Cons
Is a private mortgage in Ontario right for you? Here's an honest comparison:
✅ Advantages
- ✓Fast Approval: 1-3 days vs 2-4 weeks for banks
- ✓Bad Credit OK: Credit score doesn't matter
- ✓Self-Employed Friendly: No income verification needed
- ✓Flexible Property Types: Will finance properties banks reject
- ✓Quick Funding: Money in 5-7 days
- ✓Bridge Financing: Temporary solution while rebuilding credit
- ✓Save Your Home: Stop foreclosure/power of sale
- ✓Debt Consolidation: Replace 20%+ debt with 8-15% mortgage
⚠️ Disadvantages
- ✗Higher Interest Rates: 8-15% vs 5-7% at banks
- ✗Upfront Fees: 2-4% lender fee plus legal costs
- ✗Short Terms: 6-12 months, must refinance or sell
- ✗Lower LTV: Max 85% vs 95% at banks
- ✗Refinance Risk: Must qualify for new mortgage at term end
- ✗Interest-Only Payments: Not building equity through principal paydown
- ✗Less Regulation: More risk with individual lenders
- ✗Predatory Lenders: Risk of scams if not careful
💡 When Private Mortgages Make Sense
A private mortgage is the right choice when:
- ✓ You have sufficient home equity (15%+) but can't qualify at banks
- ✓ You need money urgently and can't wait weeks for bank approval
- ✓ You have a clear plan to refinance to traditional mortgage within 6-12 months
- ✓ You're consolidating debt with rates higher than 15%
- ✓ You're self-employed with strong income but poor documentation
- ✓ You're preventing foreclosure and need to act immediately
- ✓ The property doesn't qualify for traditional financing
🚫 When to Avoid Private Mortgages
Don't use a private mortgage if:
- ✗ You can qualify for traditional financing (even at B-lenders)
- ✗ You have less than 15% equity in your home
- ✗ You have no realistic plan to refinance or sell within term
- ✗ You're already struggling with mortgage payments (will make it worse)
- ✗ You're using it to fund consumption (vacations, lifestyle, etc.)
Alternatives to Private Mortgages
Before committing to a private mortgage, consider these alternatives:
1. B-Lender Mortgages (Alternative/Subprime Lenders)
Best for: Credit scores 550-650
- Rates: 6-9% (lower than private)
- Terms: 1-5 years
- Approval: 5-10 days
- Max LTV: Up to 90%
✅ Try B-lenders first - Lower rates than private lenders but more flexible than banks
2. Home Equity Line of Credit (HELOC)
Best for: Good credit (680+), need flexible access
- Rates: Prime + 0.5-1% (currently 7-8%)
- Max: Up to 65% of home value
- Payments: Interest-only minimum
- Approval: 2-3 weeks
3. Credit Counseling & Debt Management
If debt is the issue, consider non-profit credit counseling:
- Debt management plans (lower interest, consolidated payments)
- Consumer proposal (legal debt settlement for 20-50% of debt)
- Often better than high-interest private mortgage
4. Family Loans
Borrow from family at lower (or no) interest. Always formalize with written agreement and legal documentation to protect relationships.
Frequently Asked Questions: Private Mortgages Ontario
Can I get a private mortgage with bad credit in Ontario?
Yes, private lenders in Ontario focus primarily on property equity (loan-to-value ratio) rather than credit scores. Most will lend up to 85% LTV regardless of credit history, including bankruptcy, consumer proposals, or credit scores below 600. As long as you have 15-20% equity in your home, you can qualify.
What are private mortgage rates in Ontario 2025?
Current private mortgage rates in Ontario range from 8-15% annually, depending on:
- Loan-to-value ratio (lower LTV = lower rate)
- Property type and location (urban vs rural)
- 1st position (8-12%) vs 2nd position mortgage (10-15%)
- Lender type (institutional vs individual investor)
- Deal complexity and urgency
How quickly can I get a private mortgage in Ontario?
The typical timeline for a private mortgage is:
- Application to approval: 1-3 days
- Approval to funding: 5-7 days
- Total process: 7-10 days average
Rush deals can close in as little as 3-5 days if all documentation is ready and you use an experienced mortgage broker.
How to get a private mortgage in Ontario?
To get a private mortgage: (1) Get property appraisal and assess equity, (2) Contact private mortgage lenders or brokers, (3) Submit simple application with property details, (4) Receive approval in 1-3 days, (5) Complete legal documentation with lawyer and receive funds within 5-7 days. Total timeline is 7-10 days from start to finish.
What is a private mortgage lender?
A private mortgage lender is an individual, company, or investment group (like a Mortgage Investment Corporation) that provides mortgage loans secured by real estate. Unlike banks, private lenders in Ontario focus on property equity rather than credit scores and employment history. They can approve loans in 1-3 days and fund within a week.
What is private mortgage insurance? Do I need it?
Private mortgage insurance (PMI) is typically NOT required for private mortgages in Ontario, as lenders limit loan-to-value to 85% or less (meaning you have at least 15% equity). Traditional banks require mortgage default insurance (CMHC, Sagen, or Canada Guaranty) when your down payment is less than 20%, but private lenders don't use this system.
Can self-employed people get private mortgages in Ontario?
Yes! Private mortgages are ideal for self-employed borrowers in Ontario. Private lenders don't require 2 years of tax returns, Notices of Assessment (NOAs), or proof of income. This makes them perfect for new business owners, contractors, gig workers, or those with fluctuating income or significant business write-offs that reduce taxable income.
How much does a private mortgage cost in Ontario?
Total private mortgage costs in Ontario include:
- Interest rate: 8-15% annually
- Lender fees: 2-4% of loan amount
- Broker fees: 0-2% (often paid by lender)
- Legal fees: $1,500-3,000
- Appraisal: $300-500
Example: On a $200,000 loan, expect $8,000-12,000 in total upfront costs plus monthly interest payments of around $2,000/month (at 12% rate).
Can I refinance from a private mortgage to a bank mortgage?
Yes, many borrowers use private mortgages as bridge financing. After 6-12 months of: (1) Rebuilding credit by making on-time payments, (2) Stabilizing income or completing tax returns for self-employed, (3) Paying down debts, or (4) Completing property repairs, you can refinance to a traditional bank mortgage with lower rates (5-7%). This is the ideal exit strategy for most private mortgage borrowers.
What properties qualify for private mortgages in Ontario?
Private lenders in Ontario are more flexible than banks and will consider: residential homes, condos, townhouses, rural properties without services (well/septic), properties needing major repairs, mixed-use buildings (residential + commercial), properties with zoning issues, raw land and acreages, hobby farms, and even properties rejected by banks. If it's real estate with value, a private lender will likely consider it.
Are private mortgages regulated in Ontario?
Yes, private mortgage lenders in Ontario must follow regulations set by the Financial Services Regulatory Authority (FSRA) and comply with the Mortgage Brokerages, Lenders and Administrators Act. All mortgage brokers and agents must be licensed. Always verify your broker or lender's license through FSRA's public registry to ensure you're working with legitimate professionals.
What happens if I can't pay back my private mortgage?
If you can't repay or refinance your private mortgage at maturity (typically 6-12 months), you have several options: (1) Request an extension from your lender (often granted with fee), (2) Refinance with another private lender, (3) Sell the property to pay off the mortgage, or (4) As a last resort, the lender may initiate power of sale proceedings. It's crucial to communicate with your lender early if you anticipate problems - most are willing to work with you rather than force a sale.
About youcanqualify
youcanqualify is a team of licensed mortgage brokers in Ontario specializing in helping homeowners access private mortgage financing. With over a decade of experience in alternative lending, we've helped thousands of Ontario residents unlock their home equity when traditional banks said no.
Our mission is to provide transparent, honest guidance about private mortgage lenders in Ontario, helping you make informed decisions about your financial future. We work with a network of vetted, reputable private lenders to ensure you get fair rates and terms.
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