Private Mortgage
Mortgage financing from a private lender rather than a bank.
A mortgage provided by a private lender (an individual or private mortgage investment entity) rather than a traditional bank or credit union, often used when conventional financing is unavailable or too slow.
How It Works
A private lender extends a mortgage secured by the property, typically for a shorter term (e.g. 1 year) and often interest-only. Private mortgages are usually based more on the property's equity and value than on the borrower's full credit profile, which makes them faster to obtain but typically more expensive. Borrowers often use a private mortgage as a short-term bridge and refinance into a conventional mortgage later.
Advantages
- Faster approval and funding than conventional lenders
- More flexible on credit and income documentation
- Useful as short-term bridge financing
- Based significantly on property equity
Considerations
- Higher interest rates and fees than conventional mortgages
- Usually short term and interest-only
- Stricter loan-to-value limits
- Requires a clear exit strategy to refinance or pay off
Typical Use Cases
- Borrowers who do not meet conventional bank underwriting
- Fast closings where bank timelines are too long
- Short-term bridge needs before a refinance or sale
- Self-employed or non-traditional income borrowers
Ideal For
Borrowers needing fast, short-term, equity-based financing who have a clear exit strategy and cannot use or do not want conventional bank financing.
Risk Considerations
Higher rates and short terms mean the borrower must be confident in their exit strategy. Default can lead to quick enforcement. Private lending is less regulated than bank lending, so borrowers should use licensed brokers and seek legal advice.
Eligibility Considerations
- Sufficient property equity (lower loan-to-value expected)
- A realistic exit strategy to repay or refinance
- Provincial rules on private lending and broker licensing apply
- Borrower should understand the total cost of capital
Key Terms
Process Overview
- 1
Assess property value and available equity
- 2
Define a clear exit strategy (refinance, sale, or other)
- 3
Engage a licensed mortgage broker to source private lenders
- 4
Review the commitment, rate, fees, and term carefully
- 5
Close the mortgage and execute the exit plan on schedule
Frequently Asked Questions
Are private mortgages safe?
They can be appropriate when used correctly with a clear exit strategy, but they cost more and carry stricter enforcement. Use licensed brokers and legal counsel, and understand all terms before signing.
How long do private mortgages last?
They are typically short term, often 1 year, interest-only, with the expectation that the borrower refinances or pays off at maturity.
Trio is a marketplace platform, not a financial institution.
Trio Marketplace is not a financial institution, lender, mortgage brokerage or financial advisor. Trio does not provide, approve, arrange or guarantee financing. Financing products and services are provided by independent third-party providers. Eligibility, rates, fees, terms and approval decisions are determined by the applicable provider.
Providers for This Strategy
Independent providers whose services may relate to this strategy. Contact them directly to explore options.
Maple Ridge Mortgage Co. (Demo)
DEMO DATA — for testing only. Not a real provider. Residential and commercial mortgage brokerage.
Range: 50,000 – 2,000,000 CAD
Northstar Capital Lending (Demo)
DEMO DATA — for testing only. Not a real provider. Private lending for real estate and investment projects.
Range: 100,000 – 5,000,000 CAD
Related Strategies
Delayed Closing
Push the closing date out to give the buyer time to arrange financing.
Purchase + Refinance Strategy
Buy with short-term financing, then refinance into a long-term loan once stable.