A private mortgage can solve a short-term problem. Here is how to use one without it becoming a long-term one.
Private lenders are individuals or funds that lend against the equity in your property. They decide faster and more flexibly than banks, and they charge more for it. A private mortgage works best as a bridge to a better situation, so the plan to get out matters as much as the rate.
You've started an application.
Saves as you go · No credit check · A licensed mortgage professional follows up
1A private mortgage is secured by your property. The lender cares most about the value of the home and how much equity sits behind the loan, and less about your income or credit score.
2Terms are short, often six months to two years, and payments are frequently interest-only. The full balance is due at the end, so you need a way to repay or refinance.
3Costs add up: a higher interest rate, a lender fee, a broker fee, legal fees and an appraisal. Ask for the total cost of borrowing in writing before you decide.
4It is a regulated business. Work with a licensed brokerage that gives you a written disclosure, and get independent legal advice before you sign.
Get ready
What lenders will ask you for
Government photo ID for every owner on title
Property tax bill, proof of home insurance and your current mortgage statement
Details of any other debts secured on the property, such as lines of credit or liens
A short explanation of why you need the money and how you will repay it
Any income or asset records you can show, even if they are partial
Your options
Which kind of lender fits you
Option 1
First or second private mortgage
Money against the equity in your home, with a lender who decides mainly on the property.
Option 2
Alternative (B) lender
Often cheaper than private. They have more income and credit rules, but may suit you if your file is only slightly outside bank rules.
Option 3
Second mortgage behind your current one
Keeps your existing mortgage and rate in place while you borrow against the remaining equity.
Option 4
Fix the issue and return to a bank
Repairing credit, documenting income or clearing arrears can bring you back to bank pricing within months.
Avoid these
Common mistakes
!Focusing only on the rate. A lower rate with a high lender fee can cost more than a slightly higher rate with lower fees.
!Taking the first offer. Different private lenders price the same file differently, and a broker can compare them.
!Not planning the exit. Know in advance how the balance will be repaid at the end of the term.
!Skipping legal advice or reading the fine print on renewal, extension and early repayment terms.
Take action
Your first steps
1Write down the problem you are solving, the amount, and the date you need the money.
2Gather ID, your property tax bill, mortgage statement and any other debts on the property.
3Decide your exit plan: sell, refinance with a bank or alternative lender, or repay from a known source.
4Start the intake so a broker can compare private and alternative lenders and explain every cost.
5Review the written disclosure, ask about renewal and early repayment, and get independent legal advice before you sign.
The intake
What your application will ask
Your online application goes one topic at a time and saves every answer and document as you go, so you can stop and come back. It never runs a credit check, and a licensed mortgage professional reviews it and follows up.
For private mortgages borrowers
What is the home worth, where is it, and what is owed on it today (first mortgage and anything else)?
What do you need the money for, how much, and when?
What is happening with your income and credit right now, and why did the bank say no?
How will the loan be repaid or refinanced at the end of the term?
Plus the basics everyone answers 13
Your full name, email, mobile number and the best time to call.
The city you live in, and whether you are a Canadian citizen, permanent resident, or other status.
Are you applying alone or with someone else? If with someone, their name and how you are related.
Your goal: buy, refinance, renew, take out equity, or consolidate debt?
The property type (house, condo, multi-unit) and the city it is in.
Will you live in it, rent it out, or both?
The purchase price or estimated value, and your target closing or renewal date.
Your down payment or available equity, and where it comes from (savings, RRSP/FHSA, a gift, sale of another property).
Your approximate yearly household income before tax.
Your monthly debt payments: car loans, credit cards, lines of credit, student loans, support payments.
Your own estimate of your credit score: excellent, good, fair, poor, or not sure.
In the last 7 years, any bankruptcy, consumer proposal, collections, or missed mortgage payments?
May the broker contact you? (A credit check is only ever run later, with your separate written consent.)
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Answers
Questions people ask
What is a private mortgage?
A mortgage funded by a private lender, such as an individual or a mortgage fund, instead of a bank. It is secured against your property and priced by the equity and the risk.
How long does a private mortgage last?
Commonly six months to two years, sometimes longer. Most are meant as short-term solutions before you refinance or sell.
What does a private mortgage cost?
The interest rate is higher than a bank rate, and there are usually lender and broker fees, plus legal and appraisal costs. Your broker should show the total cost before you commit.
Do I need good credit or provable income?
Private lenders focus on the property and equity first, so credit and income matter less than at a bank, but they are still reviewed and affect the terms.
How do I get out of a private mortgage?
By refinancing with a bank or alternative lender once your situation improves, by selling the property, or by repaying from savings or another source. Ask about early repayment terms before you sign.
Does starting the intake affect my credit?
No. It is only questions. A credit check, if needed, comes later and only with your permission.
General information, not mortgage, legal or tax advice. Lender rules change and every application is reviewed on its own facts. Your application and documents are stored privately and go only to a licensed mortgage professional at Top Mortgages Inc; they are never sold, and no credit check is run without your separate written consent.