Privately Funded Mortgages in Ontario

Key Takeaways: Private mortgages are funded by individual investors or Mortgage Investment Corporations (MICs), not banks. Approval is primarily equity-based, meaning your property value matters more than your credit score or income. Rates typically range from 8-12% with terms of 6-12 months. Private mortgages are short-term solutions designed to bridge a gap while you rebuild your financial profile for better lending options.

Most people think of private mortgages as a last resort. And while it’s true that private lending is often the solution when institutional options have been exhausted, that framing misses the bigger picture. Private mortgages are a legitimate, well-regulated part of Canada’s lending landscape, and for many Ontario homeowners, they’re the bridge between a tough financial moment and a stronger future.

What Is a Private Mortgage

A private mortgage is any mortgage that doesn’t come from a bank, credit union, or trust company. The money comes from either an individual investor or a Mortgage Investment Corporation (MIC), which pools funds from multiple investors to lend as mortgages. The mortgage is registered on title by a lawyer, just like any bank mortgage, and all the same legal protections apply.

Private lenders gained significant traction after federal mortgage regulation changes made it harder for many Canadians to qualify through traditional channels. Tighter stress test rules, stricter income verification, and lower debt service ratio limits pushed a large number of creditworthy borrowers out of the bank system and into alternative lending.

Who Uses Private Mortgages

You might be surprised by how common private lending has become. Typical clients include homeowners facing power of sale who need fast refinancing to save their home, self-employed individuals whose income is hard to prove on paper, people going through a divorce who need to buy out their partner quickly, borrowers with damaged credit from a consumer proposal or bankruptcy, real estate investors who need fast closing for a time-sensitive deal, and homeowners who need to consolidate debt urgently but can’t qualify at a bank.

How Private Lending Differs From Banks

Rates, Fees, and Terms

Private mortgage rates in Ontario typically range from 8% to 12% depending on the loan-to-value ratio, property location, and complexity of the deal. Most private mortgages are interest-only, meaning you only pay the monthly interest charge with no principal reduction. On a $200,000 private mortgage at 10%, the monthly payment would be approximately $1,667.

Lender fees are standard in private lending and typically range from 2% to 4% of the loan amount. On that same $200,000 mortgage, a 3% lender fee would be $6,000, usually deducted from the advance. Legal fees ($1,500-$2,500) and appraisal costs ($300-$500) are also the borrower’s responsibility.

Terms are short, usually 12 months with an option to renew. This is intentional. Private mortgages are meant to be temporary while you work toward qualifying with a less expensive lender.

MICs vs Individual Lenders

A Mortgage Investment Corporation (MIC) pools money from many investors and operates under strict regulatory guidelines. MICs tend to have more standardized underwriting criteria, consistent rate schedules, and professional administration. Individual private lenders are single investors lending their own capital. They may offer more flexibility on deal structure but can also be less predictable.

At Canadian Mortgage Services, we work with a large portfolio of both MICs and vetted individual lenders. We match each deal to the lender whose guidelines best fit the borrower’s situation, and we ensure all terms are fair and transparent.

Is Private Lending Safe

Yes, when done through a licensed mortgage brokerage. All private mortgages must be registered by a lawyer, which means the terms, conditions, and costs are documented and reviewed to protect your interests. You’re always entitled to use your own lawyer to review the commitment before signing. At CMS, we never recommend a private lender we haven’t thoroughly vetted, and we always ensure the terms are clear before you commit.

The Exit Strategy

Every private mortgage should come with a clear exit strategy. Before we place you with a private lender, we map out how you’ll transition to better financing. That might mean rebuilding your credit score over 12 months to qualify with a B lender, waiting for a consumer proposal to discharge, stabilizing self-employment income for two tax years, or selling the property and using proceeds to move forward.

Our financial counselling services are designed specifically to help you execute this transition.

Contact us or call 905-455-5005 to discuss your situation. We’ll tell you honestly whether private lending makes sense for you, and if it does, we’ll find the best terms available.