What Is a Private Mortgage in Ontario?

What Is a Private Mortgage?

A private mortgage is a short-term loan secured by real estate, funded by individual investors or Mortgage Investment Corporations (MICs) rather than traditional banks or credit unions. In Ontario, all private mortgage transactions must be arranged through a broker licensed by the Financial Services Regulatory Authority of Ontario (FSRA).

Unlike bank mortgages, private lenders evaluate deals primarily on the equity in the property, not the borrower's credit score or income documentation.

The Numbers: Canada's Lending Landscape

To understand why private mortgages exist, look at the data. As of Q2 2025, Canadian household credit market debt reached $3.07 trillion, with mortgages accounting for nearly 75% of the total. The household debt-to-income ratio sits at 174.9%, meaning Canadians owe $1.75 for every dollar of disposable income.

Source: Statistics Canada, National Balance Sheet Accounts, Q1-Q2 2025

At the same time, the Bank of Canada's policy rate sits at 2.25% as of early 2026, after nine consecutive rate cuts from a peak of 5% in 2023. Despite lower rates, many Canadians still cannot qualify through traditional channels due to the federal stress test, which requires borrowers to qualify at the greater of 5.25% or their contract rate plus 2%.

Source: Bank of Canada, Policy Interest Rate; OSFI, Minimum Qualifying Rate for Uninsured Mortgages

Bank vs. B-Lender vs. Private: A Comparison

Source: Bank of Canada posted rates (March 2026); industry data from Ratehub.ca and bestrates.ca

Who Uses Private Mortgages?

Private mortgages serve a broader market than most people assume. Common scenarios include:

• Self-employed Canadians who cannot provide traditional T4 income documentation
• New immigrants who have not yet established Canadian credit history
• Real estate investors who need fast closings (private lenders can fund in as little as 2-3 days)
• Homeowners facing power of sale who need emergency refinancing before the 35-day redemption period expires
• Borrowers between lenders who need short-term bridge financing
• Those with bruised credit from divorce, job loss, bankruptcy, or consumer proposal

Current Private Mortgage Rates in Ontario

As of early 2026, private mortgage rates in Ontario typically fall within these ranges:

Important: the headline interest rate is not the full cost of borrowing. Factor in lender fees (1-3% of the mortgage amount), broker fees, legal costs, and appraisal fees. The effective annual cost of a typical 1-year private mortgage can approach 15% or more when all fees are included.

Source: bestrates.ca, industry data (March 2026)

The Process: What to Expect

1. Initial consultation - You provide basic details about your property and financial situation
2. Application review - Your broker evaluates the deal and matches you with appropriate lenders
3. Property appraisal - An independent appraiser assesses your property's current market value
4. Lender approval - The lender reviews and approves the mortgage (often within 24 hours)
5. Legal process - Lawyers prepare documents and register the mortgage on title
6. Funding - Funds are released, typically within 5-7 business days of approval

Ontario Home Prices: Context for LTV

Your loan-to-value ratio directly impacts your rate and approval. Here is where Ontario home prices stand:

Ontario is currently the only province where CMHC expects prices to continue declining into 2026 before recovering in 2027. For private mortgage borrowers, declining values mean lenders are being more conservative with LTV ratios.

Source: CREA Statistics (January 2026); CMHC Housing Market Outlook (February 2026)

Explore our private mortgage solutions in Toronto for more details on how we help Ontario homeowners.

Is a Private Mortgage Right for You?

A private mortgage makes sense when you need financing that traditional lenders cannot provide, and you have sufficient equity in your property. The key is having a clear exit strategy: refinancing with a bank once your credit or income situation improves, selling the property, or paying out the mortgage from another source.

If you are considering a private mortgage in Ontario, speaking with a licensed mortgage broker who specializes in private lending is the best first step. They can evaluate your situation and help you understand all your options.