In 2026, thousands of Canadians are being declined by banks — not because they’re irresponsible, but because the traditional mortgage system no longer fits real life. That’s where private lending steps in.
This is your evergreen, no-nonsense guide to private mortgages in Ontario, how they work, who they’re for, and when they make sense as a smart financial tool — not a last resort.
What Is a Private Mortgage?
A private mortgage is an alternative mortgage funded by private capital rather than a traditional bank.
Instead of relying on rigid formulas, private lenders focus on one primary factor:
Your home’s equity
This makes private mortgages ideal when:
Income is hard to prove
Credit has taken a hit
Time is critical
The property is unique
Private lending is asset-based, not algorithm-based.
How Private Lending Works (Step by Step)
1️⃣ Equity Comes First
Private lenders assess:
Property value
Existing mortgage balance
Loan-to-value (LTV)
Location and marketability
If the equity works, the deal works.
2️⃣ Purpose Matters
Private mortgages are commonly used for:
Debt consolidation
Mortgage arrears
Stop power of sale
Divorce buyouts
Probate & estate settlements
Living inheritance
Emergency liquidity
The loan must solve a problem, not delay one.
3️⃣ Exit Strategy Is Key
Private mortgages are short-term by design (6–24 months).
Typical exits include:
Refinancing back to a bank
Selling the property
Paying out from insurance, legal, or business proceeds
A clear exit = better terms.
Private Mortgage vs Bank Mortgage (Ontario Reality)
| Bank Mortgage | Private Mortgage |
|---|---|
| Income-heavy | Equity-focused |
| Stress test required | No stress test |
| Slow approvals | Fast approvals |
| Low flexibility | High flexibility |
| Low rates | Risk-adjusted rates |
Private mortgages trade rate for certainty, speed, and flexibility.
Common Types of Private Mortgages in Ontario
🏡 First Mortgages (Including Jumbo Equity Loans)
Ideal for high-value homes or unique properties where banks won’t approve — even with strong equity.
🧱 Second Mortgages
Used when:
HELOCs are frozen
Banks won’t refinance
Immediate capital is needed
Second mortgages are one of the most common alternative mortgage solutions in Canada today.
🔁 Refinance & Purchases
Private lenders fund:
Time-sensitive purchases
Bridge scenarios
Refinances banks decline at the last minute
🌉 Bridge Loans
Short-term financing between:
Sale and purchase
Refinance and payout
Construction phases
Speed is the advantage.
Who Uses Private Mortgages?
✔ Self-Employed Borrowers
Business owners, contractors, commission earners — strong cash flow, weak paper trail.
✔ Bad Credit Borrowers
Past missed payments don’t erase equity.
✔ Homeowners in Arrears
Private lending is often the fastest way to stop power of sale.
✔ Families in Transition
Divorce, estate planning, inheritance, or emergency needs require flexibility banks don’t offer.
Borrower Risks (What You Must Understand)
Private mortgages are powerful — but they must be used correctly.
Borrowers should understand:
Rates are higher due to flexibility
Terms are shorter
Exit planning is essential
Delaying action increases risk
Used properly, private mortgages fix problems — not create them.
Why Brokers Use Private Lending
Mortgage brokers increasingly rely on private lenders when:
Banks say “approved” then decline
Deadlines are immovable
Clients need certainty
Execution matters more than promises.
Investor Side: Where the Capital Comes From
Private mortgages are funded by investors through:
Mortgage notes
Mortgage Investment Corporations (MICs)
Investors are attracted by:
Asset-backed security
Predictable yields
Professional underwriting
Understanding both borrower risk and investor risk keeps the system healthy.
The Bottom Line: Equity Is the New Approval
In 2026, equity decides — not credit algorithms.
If you own property in Ontario, you likely have more options than your bank tells you.
Private mortgages are no longer a backup plan.
They’re a strategic financing tool for real life.
Your equity deserves more™