Private Mortgages in London

Key Takeaways:

• Private lenders approve based on property equity — no minimum credit score and minimal income verification required
• London property values ($517K–$740K detached by area) provide the equity base private lenders need for approval
• Private mortgage terms are typically one year — a short-term bridge while you rebuild credit for institutional lending
• Despite higher rates, private mortgages cost far less than credit card debt at 20%+ and provide a structured path to better terms

What a Private Mortgage Is and Is Not

A private mortgage is a loan funded by a non-institutional source — a mortgage investment corporation, a private lending fund, or an individual investor — rather than a bank, credit union, or monoline lender. The fundamental difference is in how the lender evaluates risk. Banks focus on the borrower: credit score, income, employment stability, and debt service ratios. Private lenders focus on the property: its value, its condition, its location, and the equity available after existing debts are satisfied. If your London property has sufficient equity, a private lender will generally fund the deal regardless of what your credit report says.

What a private mortgage is not: it is not a permanent solution. The rates are higher than institutional lending, the fees are significant, and the one-year terms mean you face renewal costs annually. No responsible broker recommends a private mortgage as a long-term strategy. It is a bridge — a way to solve an immediate problem, access equity when no other channel is available, or buy time while you rebuild the credit profile needed for B lender or A lender qualification. Every private mortgage CMS arranges comes with a documented exit plan that outlines the specific steps to transition to better terms at renewal.

Private lending is also not predatory when arranged through a licensed broker who works with reputable lenders. CMS vets every private lender in its network for transparent terms, reasonable fees, and fair dealing. The rates and costs are higher because the risk is higher — but they are disclosed fully, the math is presented clearly, and the borrower understands exactly what they are paying and why before signing anything.

When London Homeowners Need Private Lending

Credit damage from life events is the most common trigger. London's economy — anchored by healthcare at London Health Sciences Centre, education at Western University and Fanshawe College, and manufacturing — provides stable employment for most residents. But job losses, medical emergencies, separations, and business failures happen regardless of the local economy. A London homeowner who loses a position at one of the city's insurance companies or manufacturing plants may burn through savings and begin missing payments within months. By the time they seek mortgage help, their credit score has dropped below 500 and institutional lenders — even B lenders — are not available. Private lending provides financing based on the equity they have built in their home, keeping them housed and giving them time to recover.

Self-employed income that does not verify is the second major driver. London has a significant population of self-employed professionals, contractors, and small business owners whose net taxable income — after legitimate business deductions — is far below their actual earning capacity. A contractor grossing $130,000 who reports $55,000 after deductions cannot qualify for a $400,000 mortgage through conventional channels, despite easily affording the payments. Private lenders do not rely on tax returns — they evaluate the property's equity and the borrower's ability to service the debt based on real cash flow rather than CRA-reported net income.

Urgent timing is the third scenario. Bank approvals take weeks. Private approvals can happen in days. When a London homeowner is facing a power of sale with a deadline, needs to close a purchase before losing a deposit, or must pay a CRA debt to avoid further penalties, the speed of private lending is the primary value — the cost is secondary to the consequences of not acting in time.

New Canadians settling in London face a distinct challenge: strong employment and savings but no Canadian credit history. The two tradelines with 12 months of history that institutional lenders require take time to build. Private lending provides a bridge during that credit-building period, giving newcomers access to homeownership while they establish the Canadian credit profile that qualifies them for better rates at renewal.

How Private Mortgage Approval Works

The approval process for a private mortgage centres on the property rather than the borrower. Your broker submits the deal to private lenders with three core pieces of information: the property's estimated value, the existing mortgage balance, and the amount of new financing requested. The lender evaluates the loan-to-value ratio — the total mortgage debt as a percentage of the property's value — and makes a decision based primarily on whether sufficient equity exists to protect their investment.

An appraisal is ordered to confirm the property's current market value. For London properties, the appraiser considers recent comparable sales in the specific neighbourhood — North London values differ significantly from East London. Once the appraisal confirms adequate equity, the lender issues a commitment outlining the rate, fees, term, and conditions. The entire process from submission to funding can take as little as five to seven business days, compared to three to six weeks for institutional lending.

London properties across all areas generally appraise well for private lending purposes. Detached homes in North London around Masonville and Stoney Creek averaging $740,000, South London properties near Wortley Village and White Oaks averaging $657,000, and even East London homes at approximately $517,000 all provide the equity base that private lenders need. Townhomes at $485,000 and condos at $313,000 have tighter margins but can still support private financing depending on the existing mortgage balance.

Understanding the Costs

Private mortgage costs have three components: interest rate, lender fee, and legal costs. The interest rate is higher than what banks and B lenders charge — this reflects the higher risk the private lender assumes by not requiring credit or income verification. Lender fees of two to four percent of the mortgage amount are charged upfront and typically deducted from the advance. Legal costs cover the lender's lawyer and your independent legal advice, both of which are required in Ontario for private mortgage transactions.

On a $400,000 private first mortgage for a London property, a three percent lender fee represents $12,000. Monthly interest costs depend on the rate and are paid monthly — there is no amortized principal repayment on most private mortgages. The full principal balance is due at the end of the one-year term, at which point your broker arranges refinancing into institutional lending at substantially lower costs.

The cost perspective that matters most is the comparison to the alternative. A London homeowner carrying $45,000 in consumer debt at an average rate of 22 percent is paying approximately $825 per month in interest alone — with no principal reduction. A private mortgage that consolidates that debt costs significantly less per month in interest, and the credit cards go to zero, immediately reducing utilization and beginning the credit recovery that makes B lender qualification possible within 12 to 18 months. The private mortgage is more expensive than a bank mortgage, but it is dramatically less expensive than the consumer debt it replaces.

Private First Mortgage vs Private Second Mortgage

A private first mortgage replaces your existing mortgage entirely. It is used when you cannot renew with your current lender — perhaps because your credit has deteriorated since the original approval — or when you are consolidating multiple debts into a single new mortgage. The LTV maximum is typically 75 to 80 percent. Because the private lender holds first position on title, rates and fees are at the lower end of the private lending range.

A private second mortgage sits behind your existing first mortgage. It is the right tool when your first mortgage has a favourable rate that you want to preserve, or when you need additional funds beyond what your first mortgage provides. The combined LTV of first and second cannot exceed 85 to 90 percent. Because the private lender holds subordinate position, rates and fees are higher than a private first — the risk is greater, so the cost reflects that.

For many London homeowners, the choice between a private first and second depends on the existing first mortgage terms. If your first mortgage is with a bank at a competitive rate and has years remaining on the term, a private second preserves that rate and adds only the incremental funds needed. If your first mortgage is with a lender who will not renew due to credit changes, a private first replaces the entire balance and provides a fresh start with a new lender while you work on the credit improvements needed for institutional refinancing at the next renewal.

The Exit Strategy — Moving to Better Rates

The exit strategy is the most important part of any private mortgage arrangement. Without a clear plan to transition to institutional lending, a borrower can find themselves renewing privately year after year — accumulating fees and paying high interest without ever moving forward. CMS builds the exit plan before the private mortgage is even funded.

The typical exit path for a London homeowner follows a predictable pattern. During the one-year private term, the borrower focuses on the specific credit improvements identified during the initial consultation: making every payment on time without exception, reducing credit card utilization below 30 percent, maintaining two to three active tradelines in good standing, and settling any outstanding collections or judgments. These actions — executed consistently over 12 months — typically produce a credit score improvement of 80 to 150 points.

At renewal, your broker reassesses the file against B lender and A lender criteria. If the credit rebuilding plan has been followed, the borrower often qualifies for a B lender refinance — cutting the interest rate significantly and eliminating the renewal lender fee. After another 12 to 24 months of B lender payments with continued credit discipline, A lender qualification becomes achievable. The entire journey from private to A lender typically takes two to three years. It requires patience and consistent effort, but the financial improvement at each stage is substantial and measurable.

CMS monitors progress throughout the private mortgage term — not just at renewal. Mid-term check-ins at the three-month and six-month marks allow your broker to confirm the credit rebuilding actions are on track, identify any issues that could delay the transition, and adjust the plan if circumstances change. This active management is what separates a responsible private mortgage arrangement from a cycle of expensive renewals. Call 905-455-5005 to discuss your options and build your exit plan.