Private lending in Canada refers to mortgage financing provided by non-institutional lenders — individuals, Mortgage Investment Corporations (MICs), and private funds that operate outside the traditional bank lending framework. Private lenders are not governed by OSFI (the federal banking regulator), which means they can be significantly more flexible in their qualification criteria. In Ontario, they must still be registered with FSRA (the Financial Services Regulatory Authority), but their lending decisions are largely equity-driven rather than credit-driven.
Who Are Private Mortgage Lenders in Canada?
Canada's private lending market is made up of several distinct types of lenders, each with slightly different appetites and pricing:
Mortgage Investment Corporations (MICs)
MICs are pooled investment vehicles governed by the Income Tax Act. They pool investor capital and deploy it as first and second mortgages, primarily on residential real estate. MICs are the most common source of private mortgage financing in Ontario and tend to have more consistent underwriting standards than individual private lenders. Examples include Atrium MIC, MCAN Mortgage, and dozens of smaller regional MICs.
Individual Private Investors
Wealthy individuals who invest their own capital directly as mortgage lenders. They can be very flexible (even for unusual properties or situations) but may have limited capital available. Terms are often negotiable directly.
Syndicated Mortgages
Multiple private investors pool their funds for a single mortgage. Syndicated mortgages were controversial in Ontario in the 2010s (due to some fraud cases), but legitimate syndicated lending still exists for larger deals.
How Private Mortgages Work in Ontario
The private mortgage process differs from conventional lending in several important ways:
- Equity-first underwriting: Lenders focus on the LTV ratio (loan amount / property value) rather than credit score or debt ratios
- Property appraisal is critical: An independent AACI-designated appraisal is almost always required
- Short terms: Most private mortgages are 6–24 months, sometimes up to 36 months
- Interest-only payments: Many private mortgages are structured as interest-only (no principal repayment), reducing monthly payments
- Lender fee: Paid from proceeds at closing, typically 1–3% of the loan amount
- Registered on title: Private mortgages are registered as a first or second charge on your property title, just like a bank mortgage
The defining characteristic of private lending in Canada is this: if you have sufficient equity in your property, there is almost always a private lender willing to fund — regardless of credit history.
Private Mortgage Rates in Canada: What to Expect
Private mortgage rates are significantly higher than A or B lender rates. This is the price of access — the tradeoff for getting funded when conventional lenders cannot help. Current typical private mortgage rates in Ontario:
- First mortgage (65–75% LTV): 8–11% annually
- First mortgage (75–80% LTV): 10–13% annually
- Second mortgage: 11–15% annually
- Third mortgage (rare): 15–20% annually
- Lender fee (all positions): 1–3% of loan amount, paid at closing
Pro Tip: Ontario borrowers should always be shown a full cost-of-credit disclosure including all fees before committing to a private mortgage. This is an FSRA requirement your broker must fulfill.
When Does a Private Mortgage Make Sense?
Private mortgages are not for everyone — they are a specific tool for specific situations. Here are the most common scenarios where private lending is the right choice for Ontario homeowners:
- Post-bankruptcy or consumer proposal: Banks require 2+ years of re-established credit; private lenders can fund immediately after discharge
- Non-conforming properties: Rural land, properties with grow-op history, unusual construction, or significant disrepair that A-lenders won't touch
- Income doesn't qualify: Business owners, commission earners, or those with gaps in income documentation
- Speed: Estate purchases, power of sale deadlines, or tax sale situations requiring funding in 48–72 hours
- Bridge financing: Covering the gap between buying a new property and selling the existing one
- Credit recovery: Using the private term to rebuild credit before transitioning to conventional financing
The Exit Strategy: The Most Important Part of Private Lending
The biggest mistake Ontario borrowers make with private mortgages is not having a clearly defined exit strategy. A private mortgage should always be temporary. Before signing, you and your broker should have a written plan that answers:
- What specific steps will you take during the private term to qualify for conventional financing at renewal?
- What credit score do you need to reach, and what is your current trajectory?
- If the property value needs to increase to reach the required LTV for a B lender, what is the realistic timeline?
- What happens if the plan doesn't work in time — is there a renewal option on the private mortgage?
How to Find a Reputable Private Lender in Ontario
In Ontario, private lenders who operate as mortgage brokerages or administrators must be registered with FSRA. Do not work with any lender or broker who cannot provide their FSRA registration number upon request. Legitimate private lenders do not advertise on Craigslist or charge upfront fees before funding.
The safest path to a private mortgage is through a licensed mortgage broker who has established relationships with multiple MICs and private lenders. A good broker will present your deal to 3–5 private lenders and get competing offers, ensuring you get the best available rate and terms.
Wondering if a private mortgage is right for your situation? Our licensed team has arranged hundreds of private mortgages in Ontario — with transparent costs and a real exit strategy built in from day one.
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