A plain-language guide to how Ontario private mortgages work, what lenders review, how to compare total cost, and why the exit plan comes before the rate.
Four points to remember
- Private mortgages are usually short-term and property-equity focused.
- Compare interest, lender fee, brokerage fee, legal cost and net proceeds together.
- An interest-only payment does not reduce the principal.
- A realistic sale, refinance or other repayment path should be documented before closing.
Know when a private mortgage may be considered
Private financing may be considered when timing, credit, income documentation, property condition or a bank decline prevents conventional approval. It can also bridge a sale, renovation or temporary income issue. It is not automatically suitable merely because equity exists.
- Time-sensitive purchase or closing
- Temporary credit or income interruption
- Property requiring repairs before conventional financing
- Short-term equity take-out with a defined purpose
- Second mortgage without replacing a favourable first mortgage
Understand what the lender reviews
Private lenders often place significant weight on property value, location, marketability, mortgage position and combined loan-to-value. They still review the borrower, payment history, use of funds and proposed exit. An appraisal and legal review are normally part of the process.
- Property type, condition and location
- Existing mortgage and property-tax status
- Requested amount and mortgage position
- Credit and income information
- Exit strategy and timing
Calculate the true cost and net cash
The stated rate is only one cost. Lender, brokerage, appraisal, legal, administration, discharge and possible interest-reserve costs can reduce the amount delivered. Compare gross mortgage, net proceeds, monthly payment, total term cost and principal due at maturity.
- Interest rate and payment method
- Lender and brokerage fees
- Legal and appraisal costs
- Prepayment, renewal and extension terms
- Net cash after every deduction
Build the exit plan first
A private mortgage should normally have a credible exit before it starts. The plan may be a property sale, completed renovation, restored income, improved credit or refinance to an institutional lender. Test what happens if the exit takes three or six months longer than expected.
- Name the intended exit
- Set the document or credit milestones
- Begin refinancing well before maturity
- Budget for extension risk
- Track property and market assumptions
Review disclosures and independent advice
Ontario mortgage professionals must provide written information about role, compensation, conflicts, material risks and cost of borrowing as applicable. Private borrowers should read the entire commitment and legal charge, ask questions, and use the review period rather than signing under avoidable pressure.
- Step 1: confirm who represents whom
- Step 2: compare a written cost summary
- Step 3: review material risks and conflicts
- Step 4: obtain legal advice
- Step 5: sign only when the exit remains realistic
Frequently asked questions
What rate do private mortgage lenders charge in Ontario?
There is no single private mortgage rate. Pricing depends on property, location, loan-to-value, mortgage position, term, borrower circumstances and market conditions. Fees must be compared with interest.
Can a private mortgage be interest-only?
Many private mortgages use interest-only payments during a short term. The principal then remains due at maturity unless the contract provides otherwise.
What is the most important part of a private mortgage?
A suitable, realistic exit plan is essential because private financing is generally short-term and can become expensive if extended repeatedly.
Official sources and verification
This guide prioritizes primary information from governments, regulators and CMHC. Mortgage policies change; confirm the rules that apply when you apply.
This guide and its calculators are for general education only—not an approval, commitment, or legal, tax or investment advice. Actual rates, fees, underwriting and product terms vary by lender and application.