Private mortgage or bank mortgage: which costs more, and when is each worth it?
The same $500,000 loan priced at a bank, a B-lender and a private lender, and how to get from private back to the bank.
By Asim Ali, Mortgage Broker6 min read · Updated 5 November 2026
Licensed: BCFSA (BC) · RECA (Alberta) · FSRA (Ontario) · check our licences
A bank mortgage is cheaper and lasts longer. A private mortgage is faster and easier to qualify for. In November 2026, a bank charges about 4.5-5.5% with no lender fee. A private first costs 7.49-10.99% interest-only, plus 2-4% in fees, for 6-12 months. Use a bank whenever you qualify. Use private only for a short, clear reason, with a plan to get back.
What's the difference between a private mortgage and a bank mortgage?
A bank lends on your income and credit, for years. A private lender lends on your equity, for months. Almost everything else follows from that.
Here's the side-by-side, with the B-lender in the middle, as of November 2026.
| Bank | B-lender | Private lender | |
|---|---|---|---|
| Rate | 4.5-5.5% | 6.0-8.5% | 7.49-10.99% (seconds 9.49-14.99%) |
| Fees | No lender fee | About 1% lender fee | 1-2% lender + 1-2% broker |
| Qualifies on | Income, stress test, 680+ score | Bank statements OK, about 600+ score | Equity and exit plan |
| Max loan-to-value | 80% (95% insured purchase) | About 80% | 75% first, 80% combined |
| Speed | 2-6 weeks | 2-3 weeks | Commitment 1-2 days, funding 5-12 days |
| Term | 1-5 years | 1-3 years | 6-12 months |
| Payments | Pay down the balance | Pay down the balance | Interest-only |
| Prepayment | Penalty on a closed term | Penalty on a closed term | Often open after 3 months |
| Renewal | Usually offered | Usually offered | A privilege, 0.5-2% fee |
| Regulation | OSFI (federal banks) | Many are OSFI-regulated | Provincial broker rules (BCFSA, RECA, FSRA) |
| Credit reporting | Reports to the bureaus | Usually reports | Mostly does not report |
Ranges for files we place in BC, Alberta and Ontario. Credit unions are provincially regulated but use similar rules to banks.
How much more does a private mortgage cost than a bank mortgage?
On a $500,000 loan, about $30,000 more in the first year. The rate is part of it. The fees and the short term are the rest.
Illustrative example. A homeowner in Surrey has a $770,000 house. They need a $500,000 first mortgage, about 65% loan-to-value. Here's the same loan at three lenders.
| Bank | B-lender | Private first | |
|---|---|---|---|
| Rate and term | 4.89%, 5-year fixed | 6.99%, 2-year fixed | 8.49%, 12 months |
| Amortization | 25 years | 30 years | Interest-only |
| Monthly payment | $2,877 | $3,290 | $3,538 |
| Interest, first 12 months | $23,973 | $34,290 | $42,450 |
| Fees and legal | $1,500 | $6,500 | $12,600 |
| Year-one cost | $25,473 | $40,790 | $55,050 |
| Balance paid down in year one | $10,549 | $5,187 | $0 |
| APR over the term | about 5.0% | about 7.6% | 11.01% |
Bank: legal only. B-lender: 1% lender fee ($5,000) plus $1,500 legal. Private: 1% lender fee, 1% broker fee, $2,000 legal and a $600 appraisal. Amortized payments use Canadian semi-annual compounding. Private APR = total cost ÷ amount borrowed ÷ term in years.
So the private loan costs about $29,600 more than the bank in year one. It costs about $14,300 more than the B-lender. And after 12 months of private payments, you still owe the full $500,000.
Is a B-lender the middle option between a bank and a private lender?
Yes. A B-lender costs more than a bank and less than a private lender. It's the door I check first when a bank says no.
B-lenders like Home Trust, Equitable Bank and Haventree Bank accept bank statements for income and scores near 600. They charge 6.0-8.5% with about a 1% fee, on 1-3 year terms. Your payments pay down the loan. The catch is time: 2-3 weeks, and they still apply the stress test. If a B-lender can close inside your deadline, it's almost always the cheaper call. More on that in my post on B-lender mortgage companies, and on the B-lender page.
Who should pick a bank, and who should pick a private lender?
If you qualify at a bank, pick the bank. Private is for people with equity, a deadline and a problem the bank can't wait on.
A bank mortgage fits if
You can show income on T4s or two years of NOAs. Your score is about 680 or more. You pass the stress test. You have 2-6 weeks.
A private mortgage fits if
You must close in days. You have CRA debt, arrears or a notice of sale. Your income is hard to prove. You have 25% equity or more, and a way out in 12 months.
Not sure which side you're on? That's what why private lenders say yes when the bank says no walks through.
What happens when a private mortgage term ends?
You pay it off, refinance, or ask the lender to renew. Renewal isn't automatic, and it usually costs a new fee.
A bank usually sends a renewal offer if you've paid on time. A private lender may renew, charge 0.5-2%, raise the rate, or say no. Some contracts have an auto-renewal clause that lifts the rate. I read that clause before you sign. I'd rather you never need it. That's why every file we place has a written exit plan.
How do I move from a private mortgage back to a bank?
Usually in two steps: private to a B-lender after about 12 months, then B-lender to a bank at renewal. Start planning on the day you sign.
Fix the problem
The private loan pays the CRA lien, arrears or debts that caused the no.
Build a clean record
Pay everything on time. Keep card balances under 30%. File your taxes. Private lenders mostly don't report, so your other accounts carry your score.
Apply to a B-lender
We send your file with bank statements and a fresh appraisal. Give it 2-3 weeks.
Refinance out
The B-lender pays out the private loan. Pick an open-after-three-months private term so there's no penalty.
Back to a bank
At B-lender renewal, a bank may take you back at bank rates. Since 21 November 2024, an uninsured straight switch at renewal skips the stress test, if the amount and amortization stay the same.
For practical tips on handling the private stage well, see my post on tips for using private lenders.
What else do people ask about private vs bank mortgages?
Is a private mortgage worse than a bank mortgage?
It costs more and lasts less, so yes, if you qualify at a bank. But it can close in days when a bank can't. Used for 6-12 months with a plan, it's a tool, not a trap.
Can I switch from a private mortgage to a bank before the term ends?
Yes, if your terms allow it and a bank will approve you. Many private loans are open after three months. Closed terms can charge three months' interest or the rest of the term's interest.
Why is a private mortgage interest-only?
Because it's short. The lender expects to be paid out in 6-12 months, so it keeps the payment as low as it can. The trade-off is that your balance doesn't go down.
Does a private mortgage affect my credit score?
Usually not directly. Most private lenders don't report to Equifax or TransUnion. Paying off cards with the loan often helps your score.
Is a private mortgage regulated like a bank mortgage?
Not in the same way. Banks follow OSFI rules like the stress test. Private deals are covered by provincial rules: a licensed broker, written fee disclosure and an APR before you sign.
If you're weighing a private loan against waiting for the bank, call me at (604) 591-3590. I'll price all three doors for your file, in writing, so you can see the real gap. Check your options here.
Sources. OSFI Guideline B-20 · OSFI, removal of the minimum qualifying rate for uninsured straight switches, effective 21 November 2024 · Mortgage Directory private rates, October 2026 · lender websites (Home Trust, Equitable Bank, Haventree Bank), checked 4 November 2026 · BC BPCPA, Alberta Cost of Credit Disclosure Regulation and Ontario O. Reg. 191/08 cost-of-borrowing rules.
Talk it through with a licensed broker before you decide
Tell us what is going on in a few lines. We call you back the same day with what lenders will say, what it costs in dollars, and how you get back to a bank. If private is the wrong tool, we say so.
- Your full cost, in dollars, before you commit
- The lender named on your commitment letter
- A written plan to exit within 12-24 months
Asim Ali, Mortgage BrokerSurrey office · BC, Alberta and Ontario
More from Asim Ali
How does a private mortgage work in Canada?
What happens to your file after you call: who lends, how they decide, what it costs, and how the money moves.
Read the post →When does a private mortgage make sense, and when is it the wrong tool?
The situations where it is the right tool, the ones where it isn't, and a quick checklist to tell the difference.
Read the post →Why do private lenders say yes when the bank says no?
The rules banks must follow, why private lenders don't, and what that means for your rate, fees and risk.
Read the post →Tell us three things. A licensed broker calls you today.
No credit check. No ID. No date of birth. We ask what a lender decides on: the property, the equity and the deadline.
- 1Same-day call from Asim Ali or a licensed colleague
- 2A range for rate, fees and APR on the call
- 3Written commitment in 1-2 business days if you go ahead
- 4Nothing to pay until the mortgage funds
Asim Ali, Mortgage Broker
Licensed in BC, Alberta and Ontario · (604) 591-3590