TL;DR
The quality of this decision depends on three things: realistic total-cost math, a documented exit plan, and disciplined execution after funding.
What a private mortgage means in Canada
In the Canadian market, a private mortgage is funding provided by non-bank capital, often used when timeline pressure, credit events, income complexity, or property-specific issues block conventional approvals.
Private lending can preserve a purchase, refinance, or debt-consolidation timeline. The tradeoff is usually higher carrying cost and stricter term management.
When private lending is usually the right tool
- Urgent closing timelines: you need certainty quickly and standard channels cannot close in time.
- Temporary credit disruption: your profile is improving, but not yet inside conventional policy.
- Income-verification mismatch: repayment capacity is real, but documentation quality is not yet lender-ready.
- Complex collateral story: the property or current structure needs a short reset period before prime submission.
When private lending is usually the wrong tool
- You do not have a credible pathway to refinance, renew, or repay in the next planned window.
- You are solving a deep affordability gap with structure alone.
- You are choosing only on approval speed without modelling 12- to 24-month cost.
- You cannot maintain the document and payment discipline required to execute the exit plan.
Private mortgage vs nearby alternatives
| Option | Best for | Main tradeoff | Next action |
|---|---|---|---|
| Private mortgage | Speed and flexibility for short-term, non-standard files | Higher carrying cost and tighter term pressure | Define exit checkpoints before funding |
| Specialty / Alt-A lending | Borrowers who are close to conventional policy but need flexibility | More documentation effort and lender-specific conditions | Compare probability-adjusted total cost |
| Second mortgage | Equity access without replacing a favorable first mortgage | Additional lien and higher blended debt pressure | Model combined payment and legal costs |
| HELOC (if available) | Households with existing revolving home-equity room | Variable-rate exposure and qualification limits | Run a side-by-side cash-flow scenario |
Total-cost checklist before signing
- Calculate full monthly carrying cost, not just the interest rate.
- Confirm lender fees, legal fees, and discharge/switch costs in writing.
- Model your base case and a delayed-exit case.
- Set calendar checkpoints for credit and income profile improvements.
- Define the exact refinance or payout trigger before day one funding.
Decision traps to avoid
| Mental model | Common trap | Pragmatic correction |
|---|---|---|
| Present bias | Optimizing for fastest approval while ignoring medium-term carry cost | Price the full expected hold period before committing |
| Anchoring | Fixating on one quote without comparing all fee components | Compare all-in cost across at least two viable pathways |
| Status-quo bias | Staying in an expensive lane after the file has improved | Schedule fixed refinance checkpoints from month one |
| Planning fallacy | Assuming refinance will be effortless at one exact date | Maintain a backup lender path and liquidity buffer |
Your 90-day private mortgage exit playbook
Borrowers who exit private terms efficiently usually run an execution cadence, not a wait-and-hope strategy.
- Days 1-14: finalize document gaps and build a lender-ready file checklist.
- Days 15-45: stabilize payment history and clean up high-impact liabilities where possible.
- Days 46-75: rerun debt-service and qualification scenarios with updated data.
- Days 76-90: submit into primary and backup refinance pathways with clear timelines.
Best next step
- Run the debt-service calculator to test affordability under base and stress scenarios.
- Use the refinance analyzer to map your transition timeline.
- Compare specialty mortgage pathways before committing to private terms.
- Create your free account to track your action plan in one place.
- Start your pre-approval and get a structured primary-plus-backup path.
FAQ
Are private mortgages legal and regulated in Canada?
Yes. Mortgage lending is regulated, but private terms, fees, and conditions can vary significantly by province, lender, and deal structure.
Is a private mortgage always short-term?
Most private terms are designed as shorter bridges rather than long-horizon contracts. Borrowers typically plan an exit at funding, not near maturity.
Can I refinance out of a private mortgage early?
Often yes, but actual break terms and costs depend on your contract. Review these details before signing so your exit remains practical.
