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What Is a Private Mortgage in Ontario, and When Might It Make Sense?
Last updated: April 14, 2026
A private mortgage in Ontario is a mortgage secured against real estate that comes from a non-bank lender. That lender may be an individual investor, a mortgage investment corporation, or another private source of funds.
Private mortgages are usually used when a bank or standard lender is not the right fit, when time is tight, or when the file needs more flexibility than a traditional mortgage can offer. They can be useful in the right situation, but they are usually more expensive and are often better treated as a short-term solution rather than a long-term plan.
Quick Answer
A private mortgage may fit if you have enough equity, the file does not fit a bank well, and there is a realistic plan to pay the mortgage out later. It may not be the right answer if a lower-cost refinance, renewal solution, or second mortgage can solve the problem more cleanly.
On This Page
- What is a private mortgage?
- Who it may fit, and who it may not fit
- How private mortgages usually work
- What private lenders usually look at
- Costs and risks to understand
- Private mortgage vs refinance, renewal, and second mortgage
- Process and document checklist
- What to think about before you apply
- FAQ
What is a private mortgage?
A mortgage is called “private” because of who the lender is, not because of what the money is used for. A private mortgage can be a first mortgage or a second mortgage. It can be used for a refinance, debt consolidation, bridge financing, renovations, tax arrears, or another short-term need.
In plain English, private mortgages are usually defined by a few common features:
- the lender is not a major bank or standard institutional lender
- the loan is secured by the property
- the term is often shorter than a standard long-term mortgage strategy
- the cost is usually higher than a standard mortgage
- the lender often focuses heavily on equity, property, and exit strategy
A private mortgage is also not the same as an unsecured loan. It is tied to your property. That can make it useful in some situations, but it also means the consequences can be more serious if the plan does not work out.
Who it may fit, and who it may not fit
Private mortgages are often used when the file is workable, but the bank guidelines are too tight for the current situation.
It may fit when:
- you have enough equity in the property
- your income is real but harder to prove in the way a bank wants
- your credit has issues that are limiting standard options right now
- you need short-term financing while working toward a cleaner refinance later
- you need to solve a time-sensitive problem and the file will not wait for a slower lender process
- the property or structure is unusual enough that standard lenders may not be the best fit
It may not fit when:
- a lower-cost traditional or alternative option is available now
- there is very little equity
- there is no clear plan to pay the mortgage out later
- the real need is a long-term affordable solution, not a short-term bridge
- the cost would mostly delay the problem instead of solving it
If the main issue is irregular income, it may also help to review income issues. If the main issue is bruised credit, it may also help to compare credit issues.
How do private mortgages usually work?
Private mortgages are usually built as short-term solutions, not permanent financing. In many cases, the monthly payment may be interest-only, which can keep the payment lower than a fully amortized payment but usually means the principal balance does not reduce much during the term.
- Term: often shorter-term, depending on the file and the lender
- Payments: often structured as interest-only
- Position: may be first mortgage or second mortgage
- Approval focus: often more weight on equity, property, and exit plan than a standard bank file
- End of term: the mortgage usually needs to be paid out, refinanced, or renewed if the lender agrees
Because of that structure, a private mortgage usually works best when there is already a realistic next step in mind.
Plain-English terms that matter
- Loan-to-value (LTV): the percentage of the property’s value that is being borrowed against
- Interest-only: payments may cover only interest during the term
- Exit strategy: the plan for how the private mortgage will be paid out later, such as a sale, refinance, or another source of funds
- MIC: a mortgage investment corporation that pools investor money and lends against real estate
What do private lenders usually look at?
Private lenders may look at the full picture, but they usually care most about the strength of the security and whether the file makes sense on a short-term basis.
- Equity in the property
- The property itself and how marketable it is
- The total debt against the property
- Your recent credit history
- Your income or cash flow story
- The purpose of the mortgage
- Your exit strategy
What tends to help is strong equity, a clear reason for the mortgage, clean supporting documents, and a believable plan for repayment. What tends to hurt is very high leverage, no clear payout plan, title or tax issues, or a property the lender may view as difficult to sell if enforcement ever became necessary.
What costs and risks should you understand?
Private mortgages are usually more expensive than bank mortgages. The exact cost depends on the property, the equity position, the timeline, the size of the loan, the borrower profile, and the lender’s view of the risk.
Costs may include:
- a higher interest rate than a standard mortgage
- lender fees
- broker fees where applicable
- appraisal costs
- legal fees
- possible renewal, extension, discharge, or default-related costs depending on the deal
The bigger question is not only whether the mortgage can be approved. It is whether the total cost makes sense for the problem being solved.
Key risks to understand
- Higher cost: private money usually costs more than standard mortgage money
- Short-term pressure: the mortgage may need to be replaced or paid out sooner than expected
- Limited principal reduction: if the payments are interest-only, the balance may not move much
- Renewal is not guaranteed: the lender does not have to extend the mortgage later
- Enforcement risk: because the loan is secured by the property, missed payments can become serious quickly
This is why private mortgages are usually better viewed as a bridge, not a forever solution.
How is a private mortgage different from a refinance, renewal, or second mortgage?
These terms are related, but they do not mean the same thing.
- Private mortgage: describes the lender type. A private mortgage can be first position or second position.
- Refinance: replaces the current mortgage with a new one. Learn more about refinancing in Ontario.
- Renewal: continues or replaces a mortgage at the end of a term. If your issue is really an upcoming maturity, it may be worth reviewing renewal options before assuming private money is necessary.
- Second mortgage: adds another mortgage behind the first one. Learn more about second mortgages in Ontario.
Sometimes a private mortgage is also a private second mortgage. Sometimes it is a private first mortgage. The right comparison depends on what you are trying to accomplish, how much equity is available, and whether the need is short-term or long-term.
If the main reason is debt pressure, it may also help to compare this with debt consolidation options. If you want to run numbers first, the mortgage calculators and mortgage glossary may also help.
What does the process usually look like, and what documents may help?
The exact process varies by file, but it often looks something like this:
- Review the situation clearly. Start with the property, the equity, the reason for borrowing, and whether private lending is actually the best fit.
- Gather documents. The file usually needs enough information to explain the property, the debts, the income story, and the plan.
- Assess the structure. This is where first mortgage, second mortgage, refinance, term length, payment type, and total cost should be reviewed together.
- Obtain lender terms. The lender may require an appraisal, title review, and other conditions before final approval.
- Close through a lawyer. A lawyer is normally involved in closing and registering the mortgage.
- Work the exit plan early. The best time to think about the payout plan is at the beginning, not near the end of the term.
Documents that may be helpful include:
- government-issued ID
- mortgage statement
- property tax information
- income documents where available
- bank statements if needed
- a recent credit report
- a list of debts and monthly obligations
- a clear explanation of the purpose of the mortgage
- details of the exit plan
What should you think about before you apply?
- What problem is this mortgage actually solving?
- How long do you expect to need it?
- What is the exit plan?
- What is the full cost, including fees and legal costs?
- What happens if the property value, timing, or refinancing plan does not go as expected?
- Would a refinance, renewal strategy, or second mortgage be a better fit?
The right next step is usually not to apply everywhere. It is to review the file carefully first so the structure matches the actual problem.
Frequently Asked Questions
What is a private mortgage and how is it different from a bank mortgage?
A private mortgage is a real-estate-secured mortgage from a non-bank lender. It is usually more flexible and faster than a bank mortgage, but it is also usually more expensive and more short-term.
Who may qualify for a private mortgage in Ontario?
Qualification often depends more on equity, property, and exit strategy than a standard bank file. Borrowers with irregular income, credit issues, time pressure, or unusual property situations may still fit if the overall file makes sense.
Are private mortgages always second mortgages?
No. A private mortgage can be a first mortgage or a second mortgage. “Private” describes the lender type, not the position on title.
Are private mortgages usually interest-only?
Often, yes. Many private mortgages are structured with interest-only payments during the term, which is why the exit plan matters so much.
What costs should you expect?
Private mortgages usually come with higher rates than bank mortgages and may also include lender fees, broker fees, appraisal costs, legal costs, and other setup or renewal costs depending on the file.
What happens if you cannot pay out the mortgage at the end of the term?
You may need to refinance it, renew it if the lender agrees, sell the property, or use another repayment source. If there is no workable exit, the risk becomes much more serious.
Do you need a lawyer for a private mortgage?
Usually, yes. A lawyer is normally involved in closing and registering the mortgage, and the legal paperwork should be reviewed carefully before signing.
Can a private mortgage help with debt consolidation?
Sometimes, yes. It may help when there is enough equity and the structure solves a real short-term problem, but the full cost and long-term plan still need to be reviewed carefully.
About Roger
Roger Carroll is the mortgage professional behind MortgageOntario.ca. He works with Ontario homeowners who need clear, practical guidance on refinancing, renewals, private mortgages, second mortgages, and other equity-based options.
The goal is simple: explain the options clearly, point out the trade-offs honestly, and help you decide whether a private mortgage actually fits your situation.
If you want to review whether a private mortgage is the right tool for your situation, I can help you look at the property, the equity, the cost, and the exit plan before you commit to anything.