When does a private mortgage make sense, and when is it the wrong tool?
The seven situations a private mortgage is built for, the four where it does harm, and a checklist to tell them apart.
By Asim Ali, Mortgage Broker7 min read · Updated 5 November 2026
Licensed: BCFSA (BC) · RECA (Alberta) · FSRA (Ontario) · check our licences
A private mortgage makes sense when you have real equity, a hard deadline, and a clear way out within 12 to 24 months. Think of a refused renewal, a CRA lien, or a notice of sale. It's the wrong tool when a B-lender can do the job in time, when you'd owe more than about 80% of your home's value, or when the real problem is that the monthly budget doesn't work. Private money buys time. It doesn't fix a budget.
What makes a private mortgage the right tool?
Three things together: equity, a deadline, and an exit. If one is missing, I usually talk people out of it.
- Equity. At least 20-25% left in the home after the new loan.
- A deadline. A date that a bank or B-lender can't meet. A maturity, a closing, a court date.
- An exit. A refinance or sale you can name today, within 12 to 24 months.
A private first costs 7.49% to 10.99% in November 2026, plus fees. You pay that to buy time. It's worth it only when the time solves something.
Which situations is a private mortgage built for?
These seven come across my desk most. Each has a deadline that cheaper lenders can't meet, and a way back to a bank or B-lender.
Your renewal was refused
The maturity date is close. A private first pays the bank out while you rebuild the file. Common for self-employed borrowers. See mortgage renewal denied.
You bought before you sold
Your purchase closes before your old home sells firm. Banks want a firm sale to bridge. Private lenders don't. See bridge loans.
CRA has a lien on your home
CRA has registered on title, and banks won't refinance past it. A private loan pays CRA out at closing. See CRA tax debt.
You got a notice of sale
You're inside the redemption window and the equity is there. A private first pays the arrears and legal costs. See stop foreclosure or power of sale.
A consumer proposal blocks a refinance
Most banks won't refinance during an active proposal. A private loan can pay it out so you can start rebuilding. See consumer proposal mortgages.
You need to close fast
A quick-close purchase or a court-ordered sale with a short, firm date. Private funding takes 5-12 days. Banks often take 2-6 weeks.
A build needs finishing
The draw lender won't advance more. A private loan finishes the build, then a bank takes over. See construction and land loans.
When is a private mortgage the wrong tool?
It's the wrong tool when it only delays a problem it can't fix. In these four cases I'll tell you not to do it, even if a lender would say yes.
- No exit in 12 to 24 months. If you can't name the lender or the sale that ends this loan, you'll renew, pay new fees, and lose equity each year.
- Thin equity. Above about 80% combined loan-to-value, the rate and fees climb fast. A small drop in value can trap you.
- A B-lender could do it in time. B-lenders charge 6.0-8.5% plus about 1%, and your payments cut the balance. They fund in 2-3 weeks. If you have that long, use one. See B-lender mortgages.
- A long-term affordability problem. If the household can't carry its costs, a private loan just adds cost.
A lender's yes isn't a reason. Private lenders lend on equity. They can say yes to a loan that's bad for you. Your broker's job is to say no first when it is.
Should you try a B-lender before a private lender?
Yes, almost always. I always check a B-lender first. If one can approve and fund you before your deadline, it's cheaper and safer.
Home Trust, Equitable Bank and Haventree Bank accept bank-statement income and bruised credit. They want about 20% equity and a score near 600. Go private only when the clock is shorter than their 2-3 weeks.
How much does a private mortgage cost for a short fix?
On a $400,000 first, a year of private money costs about $44,560 all in. That's roughly $11,600 more than a B-lender's first year. Leaving early saves interest, but the fees don't shrink.
Illustrative example. $400,000 private first at 8.49%, interest-only. Lender fee 1%, broker fee 1%, legal $2,000, appraisal $600. Compared with a B-lender at 6.99% with a 1% fee, $1,500 legal, and a 30-year amortization.
| Scenario | Interest | Fees and costs | Total cost | APR |
|---|---|---|---|---|
| Private, kept 12 months | $33,960 | $10,600 | $44,560 | 11.14% |
| Private, paid out at month 6 | $16,980 | $10,600 | $27,580 | 13.79% |
| B-lender, first year | about $27,400 | $5,500 | about $32,900 | Lower, and the balance drops |
Illustrative example, not a quote. APR = total cost ÷ amount borrowed ÷ term in years. Try your own numbers on the true-cost calculator.
The month-6 row surprises people. The total is lower, but the APR is higher. Fees are paid once, so a shorter loan spreads them over fewer months.
How do you decide if a private mortgage is right for you?
Run down these six questions in order. If you get to the bottom with every answer pointing to private, it probably makes sense.
| Question | If yes | If no |
|---|---|---|
| 1. Can a bank or B-lender approve and fund before your deadline? | Use them. Stop here. | Go to question 2. |
| 2. Is there a real deadline: a maturity, closing, CRA demand or court date? | Go to question 3. | You have time. Fix the file and use a cheaper lender. |
| 3. Will the total of all mortgages stay under about 75-80% of value? | Go to question 4. | Private likely won't fit. Talk about selling or a smaller loan. |
| 4. Can you name your exit within 12-24 months? | Go to question 5. | Don't borrow yet. Build the exit first. |
| 5. Is this a one-time event, not a monthly shortfall? | Go to question 6. | Private adds cost. Look at the budget, a sale, or a trustee. |
| 6. Can you carry the interest-only payment for the full term? | A private mortgage likely makes sense. | Ask about prepaid interest, or a smaller loan. |
A starting point, not advice for your file. Your broker and your own lawyer should check every answer.
What should you do if a private mortgage isn't the answer?
Start with the cheapest door that's still open. Then work toward the one you want.
- Time but no bank yet? Spend 2-3 weeks on a B-lender file.
- No exit? Build one first. The exit strategy guide shows how.
- Equity too thin? A sale on your own terms often keeps more of it than a forced one later.
- Budget doesn't work? A non-profit credit counsellor or a Licensed Insolvency Trustee can show you options a lender can't.
Once you've chosen one, see my tips for using private lenders.
What else do people ask about when to use a private mortgage?
Is a private mortgage a bad idea?
Not when it's used for a short time with a clear exit. It becomes a bad idea when it's the plan instead of a step. If you can't name how it ends, wait.
When should I use a private lender instead of a bank?
When the bank can't help in time and a B-lender can't either. Usual reasons are a deadline under 2-3 weeks, a CRA lien, an active consumer proposal, or a notice of sale.
How much equity do I need for a private mortgage?
About 25% for a first mortgage. For a first and second together, most lenders stop around 80% combined in big cities. Rural homes need more.
Can I get a private mortgage if I can't afford the payments?
Some lenders hold back prepaid interest, so there's no monthly payment. But if the household can't carry its costs, a private loan makes things worse.
If you're not sure which side of the line you're on, call me at (604) 591-3590 or check your options. I'll look at a B-lender first, and I'll tell you plainly if private isn't the right move. — Asim Ali, Mortgage Broker
Sources. FSRA private mortgage guidance on exit plans · Mortgage Directory private rates, October 2026 · Home Trust, Equitable Bank and Haventree Bank program pages, checked 4 November 2026 · Office of the Superintendent of Bankruptcy, consumer proposals. Updated 5 November 2026.
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
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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