Private Mortgage Lenders in Ontario: Rates, Risks & When to Use One
Private mortgages are one of the least understood — and most misrepresented — financial tools in Ontario real estate. They carry higher rates than bank mortgages, but for the right borrower in the right situation, they can be the fastest and most practical path to solving a complex financial problem. Here's everything you actually need to know.
What Is a Private Mortgage Lender?
A private mortgage lender is a non-institutional lender — typically an individual investor or a Mortgage Investment Corporation (MIC) — that lends money secured by real estate. Unlike banks and credit unions, private lenders are not regulated by OSFI and do not follow the B-20 stress test guidelines. They set their own lending criteria.
In Ontario, private mortgage lenders must still be licensed under FSRA (Financial Services Regulatory Authority of Ontario) if they are in the business of dealing in mortgages. Brokers arranging private mortgages must also be FSRA-licensed.
How Private Mortgage Lending Works
Private lenders make equity-based lending decisions. Rather than primarily evaluating your income, credit score, and debt ratios (as banks do), private lenders focus on:
- The value of the property (appraised or estimated market value)
- The Loan-to-Value ratio (LTV) — how much is being borrowed relative to value
- The borrower's exit strategy — how will the mortgage be repaid or refinanced?
- The property's marketability — can the lender sell it if necessary?
This means a borrower with damaged credit, self-employment income, or a recent bankruptcy can still access private mortgage funds if they have sufficient equity in their property.
Private Mortgage Rates in Ontario
Private mortgage rates in Ontario are higher than bank rates, reflecting the higher risk the lender is taking by lending outside conventional qualification guidelines. Expect rates in the range of 7–12%+ OAC depending on:
- LTV — lower LTV = lower rate
- Property type — residential is lower risk than commercial or rural
- Borrower profile — credit history, income stability, exit strategy quality
- Mortgage position — first mortgage is lower rate than second mortgage
- Geographic market — major GTA markets are lower risk than rural or Northern Ontario
In addition to the interest rate, private mortgages typically carry lender fees of 1–3% of the mortgage amount, and broker fees. These are usually funded into the mortgage rather than paid out of pocket.
| Mortgage Type | Typical Rate Range (OAC) | LTV Range |
|---|---|---|
| Private 1st Mortgage (residential) | 7–10% | Up to 75–80% |
| Private 2nd Mortgage (residential) | 9–12%+ | Up to 80–85% combined |
| Private Commercial | 8–14%+ | Up to 65–70% |
| Private Construction | 10–14%+ | Based on as-complete value |
When a Private Mortgage Makes Sense
Power of Sale / Foreclosure Bailout
The most time-sensitive application. Private lenders can commit in 24–48 hours and close in 3–7 business days — fast enough to fund a redemption before a power of sale completes.
Credit Repair Bridge
A consumer proposal, bankruptcy discharge, or series of missed payments can put conventional mortgages out of reach for 2–3 years. A private mortgage bridges the gap while credit rebuilds, with a refinance to B or A-lender rates once the credit profile qualifies.
Self-Employed Borrowers with Insufficient Declared Income
When B-lender stated income programs won't stretch far enough, private lending provides an equity-based alternative with no income verification requirements.
Short-Term Bridge Financing
Closing on a new property before selling the existing one. Non-arms-length transactions. Closing gaps when institutional funding falls through at the last minute.
Property Types Banks Won't Touch
Cannabis grow-op remediation, rural acreage, unique or distressed properties — private lenders have more latitude on property types than institutional lenders.
Risks of Private Mortgages
⚠ Private mortgages are a short-term tool, not a long-term strategy. Going into a private mortgage without a clear exit plan is the most common mistake borrowers make.
Higher Cost
At 8–12% plus fees, private mortgage financing is significantly more expensive than conventional lending. On a $500,000 mortgage at 10%, you're paying $50,000 in annual interest — versus $25,000–$30,000 at current A-lender rates. The premium is justified for short-term problem-solving but unsustainable long-term.
Short Terms
Most private mortgages are structured for 1-year terms with the expectation of refinancing. If your credit, income, or property situation hasn't improved enough to qualify for a conventional lender at renewal, you may need to renew at private rates again — or face more serious consequences.
Enforcement Risk
Private lenders — especially individual investors — are quicker to enforce (proceed to power of sale) on default than institutional lenders. Understand the terms of your mortgage and ensure your exit strategy is realistic.
Need a Private Mortgage in Ontario?
Paul Hunjan works with a network of Ontario private lenders — individuals and MICs — across the GTA and province-wide. He structures private mortgages with clear exit strategies to protect your long-term interests.
Explore Private Mortgage OptionsHow to Choose a Private Mortgage Lender
Never approach a private lender directly without representation. Work with a licensed mortgage broker who:
- Has established relationships with reputable private lenders (not just one source)
- Clearly discloses all fees and terms upfront
- Builds your exit strategy into the mortgage structure from day one
- Is FSRA-licensed in Ontario
What documentation do private lenders require?
Far less than banks. Typically: a recent property appraisal or evaluation, proof of ownership, existing mortgage statement(s), ID, and a brief explanation of the borrowing need. Income documentation requirements are minimal or none for equity-based private lending.
