The complete guide to private mortgage deals in Canada

Private mortgages fill a gap that A-lenders and B-lenders cannot. For agents who understand how to structure them, private deals are a valuable part of the toolkit — not a last resort, but a legitimate and sometimes optimal solution for specific borrower situations. Done well, a private mortgage gets a client unstuck and positions them for a better rate at renewal. Done poorly, it straps them with costs they cannot sustain and leaves them no way out.

This guide covers what you need to know to work private mortgage files competently.

Who uses private mortgages

Private mortgages are typically used by borrowers who cannot qualify through institutional lenders for one or more of the following reasons:

• Credit challenges — recent collections, consumer proposals, or past bankruptcy
• Income that cannot be verified — self-employed borrowers without two years of filed returns, cash-income workers
• Debt ratios too high for A or B lenders — typically TDS above 50%
• Bridge financing — a borrower who needs funds before a sale closes or before a conventional mortgage can be arranged
• Property that doesn't fit lender guidelines — rural properties, non-conforming construction, properties in disrepair
• Time pressure — a deal that needs to close in days, not weeks

How private lenders think about deals

Private lenders do not use GDS/TDS ratios or credit score thresholds the way institutional lenders do. Their primary concern is the property. The core question a private lender asks is: if this borrower stops making payments, can I recover my principal by selling the property?

This means property value, location, and LTV are the most important factors in a private deal. Everything else — income, credit, employment — is secondary, though not irrelevant.

LTV limits in private lending

Private lenders rarely lend above 75% LTV on a first mortgage in urban markets. In smaller markets or rural properties, 65–70% is more typical. For second mortgages, combined LTV (first plus second) generally stays under 80%, with many private lenders capping it at 75%.

Deal structure: what a private mortgage looks like

Most private mortgages in Canada are:

• Short-term — 6 to 24 months, with 12 months being most common
• Interest-only — the borrower pays only the interest each month, with the full principal due at maturity
• Open or closed — many private deals are open, meaning the borrower can repay early without a prepayment penalty. Some MICs write closed mortgages with penalties.
• Registered on title — either in first or second position, depending on the deal structure

Typical rates and fees

Private mortgage rates vary significantly based on risk, LTV, and lender type. As of 2026, common ranges:

• First position private mortgages: 8%–13% per year
• Second position private mortgages: 12%–18% per year
• Lender fees: 1%–3% of the mortgage amount
• Broker/agent fees: 1%–2% of the mortgage amount (subject to provincial disclosure rules)
• Legal fees: borrower typically pays both their own legal costs and the lender's legal costs

MIC vs. individual private lender

Private mortgages in Canada come from two main sources: Mortgage Investment Corporations (MICs) and individual private lenders.

A MIC is a pool of investor capital structured as a corporation under the Income Tax Act. Investors buy shares in the MIC and receive dividends from mortgage interest income. MICs are regulated, have established underwriting guidelines, and often have faster and more predictable processes. Many MICs lend in the 65–80% LTV range and have clear rate tiers based on risk.

An individual private lender is exactly what it sounds like — a single investor (often a high-net-worth individual) lending their own capital. Individual lenders can be more flexible on terms but less predictable in timeline and decision-making. Their risk appetite varies widely. Some will lend in situations a MIC would not touch; others are very selective.

For most agents, a handful of reliable MIC relationships is more efficient than managing individual lenders for every private deal.

Exit strategy: the most important part of the file

A private mortgage that closes successfully is not a finished transaction — it is the beginning of a 12-month plan. Exit strategy is what separates a good private deal from a harmful one.

Before placing any private mortgage, you need a clear, realistic answer to: how does this borrower get off private lending and onto institutional financing? Common exits:

• Credit repair + refinance — borrower uses the 12 months to pay down derogatory accounts and qualify with a B-lender or A-lender at renewal
• Sale of the property — borrower is selling and using private financing as a bridge to close
• Income documentation improvement — self-employed borrower files two years of returns during the private term to qualify conventionally at exit
• Equity improvement — borrower uses the term to build equity (through renovation and property appreciation) that allows a refinance at a lower LTV

If none of these apply and there is no realistic path to institutional lending within 12–24 months, you need to have a frank conversation with the borrower before proceeding.

Risk factors agents should assess

The risks on a private deal sit mainly with the borrower, but also with the agent professionally. Key risk factors to evaluate:

• Can the borrower actually service the interest payments? Interest-only on a $300,000 second at 14% is $3,500/month. Verify cash flow.
• Is the property value supportable? Get an appraisal — do not rely on the borrower's estimate.
• What happens if the exit strategy does not work? Is the borrower stuck needing another private renewal at potentially worse terms?
• Are there any environmental issues, construction liens, or title encumbrances that the private lender's due diligence will uncover?

Private lending done well is a legitimate and valuable service. The borrowers who need it genuinely need it, and the agents who understand how to structure these deals build strong practices around them. The key is treating every private file with the same rigour you would bring to any other deal — not less.