Neighbourhood HoldingsRateSensePrivate LenderPrivate LenderTerm 1 yearStarting Rate 8.95%Starting Fee 2.00%
Three Point Capital1st mortgagePrivate LenderPrivate LenderTerm 1 - 2 yearStarting Rate 9.25%Starting Fee 2.00%
Alta West CapitalExpress 1stPrivate LenderPrivate LenderTerm 2 yearStarting Rate 9.49%Starting Fee 2.00%
Alta West CapitalFlex 1stPrivate LenderPrivate LenderTerm 1 yearStarting Rate 9.49%Starting Fee 3.50%
Neighbourhood HoldingsNational 1st MortgagePrivate LenderPrivate LenderTerm 1 yearStarting Rate 9.95%Starting Fee 1.00%
Alta West CapitalFlex BundlePrivate LenderPrivate LenderTerm 1 yearStarting Rate 9.99%Starting Fee 3.99%
VWR CapitalPrivate 1stPrivate LenderPrivate LenderTerm 1 yearStarting Rate 10.50%Starting Fee 2.00%
Vault CreditClassic 2ndPrivate LenderPrivate LenderTerm 1 yearStarting Rate 10.99%Starting Fee 3.00%
Alta West CapitalFlex 2ndPrivate LenderPrivate LenderTerm 1 yearStarting Rate 11.25%Starting Fee 4.00%
Three Point Capital2nd mortgagePrivate LenderPrivate LenderTerm 1 yearStarting Rate 11.75%Starting Fee 2.00%
Quick Facts About Private Mortgages
Ontario residents who cannot qualify for a mortgage through a traditional lender, such as a bank or credit union, can consider going through a private mortgage lender. Hundreds of private lenders in Ontario can provide quick access to financing on a short-term basis.
- Will consider borrowers with poor credit or non-traditional income sources.
- Lend primarily based on home equity, so the location and state of your home are important factors.
- Home equity is the portion of your home you own, calculated by the Loan to Value (LTV) ratio: your mortgage amount divided by the home’s value.
- Can lend up to 85% Loan to Value, although 75% is standard for a 1st mortgage.
- Origination fees of 2% or more usually apply.
- Interest rates start around 4% higher than prime lending rates.
- Considered temporary financing, mortgage terms range from 1 to 3 years, with 1 year terms the most common.
What Are Private Mortgage Lenders?
Mortgage lenders fall into three categories: A lenders, B lenders, and Private Lenders.
A Lenders (aka Prime Lenders)
A Lenders include the big banks, like TD, RBC, and Scotiabank, credit unions, and mortgage-only lenders like First National or MCAP Financial. Prime lenders offer the lowest mortgage rates but are highly regulated by the federal government.
B Lenders are a type of specialty financing product for clients that can’t traditionally qualify with prime lenders. Popular B lenders include Home Trust, Equitable Bank, and Haventree Bank. Monoline lenders (aka mortgage-only lenders), such as CMLS and First National, are traditionally prime lenders but have started launching B-mortgage products in the last several years.
First National has launched the Excalibur product line, and CMLS has developed the AVEO mortgage products. Depending on the borrower, B Lenders offer slightly higher interest rates than A lenders and usually come with a setup fee.
Private mortgage lenders are private companies, Mortgage Investment Corporations (MICs) or wealthy individuals who lend money to borrowers that cannot qualify for a mortgage loan through an A or B lender. If you have poor credit or cannot meet a lender’s income requirements, a private mortgage can be a short-term solution until you can qualify through a traditional bank.
Because private mortgages are designed to be temporary loans, they usually feature shorter terms, and high interest rates and origination fees. Private mortgage lenders can be more flexible than banks regarding approval criteria and repayment options. However, they usually want a clear 1 to 3-year exit strategy, where you can graduate from private financing and into a B or Prime lender.
How Do Private Mortgages Work in Ontario?
The best way to locate a private mortgage lender in Ontario is through a mortgage broker. In fact, most private lenders will only deal with you through a mortgage broker. After all, hundreds of private mortgage lenders operate in the province, each with its own mortgage rates and lending criteria.
A mortgage broker will ask questions to understand your situation. They will let you know if a private mortgage lender is a suitable option and be able to recommend the right lender to you.
What Is the Eligibility Criteria for a Private Mortgage?
Unlike traditional mortgage lenders, which base their approvals on creditworthiness and satisfactory income confirmation, private mortgage lenders are more concerned with your home’s value and equity.
For mortgages in 1st position, most private lenders will want you to have at least 25% equity in your home (75% LTV), though 65% LTV is becoming more common (35% equity). The highest most lenders will go on a 1st position mortgage is 80% LTV (20% equity).
Second-position mortgages are available up to 80% LTV or with as little as 20% equity. Some private mortgage lenders will allow you to take out a 3rd position mortgage.
What Are the Fees for a Private Mortgage?
In addition to interest charges, most private mortgages charge origination fees of 1% to 5% of the loan amount, which is one of the reasons private mortgages are more costly than those offered by A Lenders. However, they will often wrap these fees into the mortgage financing, so you don’t need to pay them out of pocket.
Reasons You Might Consider a Private Mortgage
Traditional lenders offer the lowest mortgage interest rates and are the best solution over the long term. However, not everyone can qualify for a bank or credit union mortgage. If you are in one or more of the following situations, a private mortgage may be your best option.
You have poor credit
You must have good credit to qualify for a mortgage through a traditional lender. If you also cannot qualify through a B lender, a private mortgage can be an option until your credit score improves. Many private lenders don’t have a minimum credit score requirement because they consider other criteria instead.
You’re purchasing vacant land
Most traditional lenders are reluctant to lend money for vacant land purchases. As a result, they often impose strict approval requirements, which can be challenging to meet. Many private lenders in Ontario and elsewhere offer vacant land loans with flexible approval criteria.
You’re self employed and don’t have enough taxable income
If you are newly self-employed and need a mortgage, you may have difficulty getting approved through a traditional lender. That’s because most banks and credit unions require self-employed borrowers to confirm two years of income history from their business to qualify. Unlike salaried employees, you can’t use a couple of recent pay stubs or an employment letter.
However, many private mortgage lenders will accept a stated income declaration with no proof of income. That said, your income must be reasonable. For example, if you state that you’re a plumber and make $300,000 per year, the lender will likely want to see some type of documentation or financial records to prove it.
If a Prime lender is declining you for income reasons, you could consider a private mortgage for one or two years until you’ve established a consistent income history for your business.
You earn non-traditional or foreign income
Traditional lenders treat non-traditional income similarly to self-employment income. If you work seasonally or earn commission income, you must provide two years of income history using tax documents, like Notice of Assessments (NOAs) or T1 Generals. If you cannot do so, consider exploring a private mortgage until you can qualify with a traditional lender later.
You’re building a new home
If you plan to build a new home, there are advantages to dealing with a traditional lender like a bank. You’ll get the lowest possible rates and be able to choose from a range of mortgage options.
However, banks lack flexibility regarding the construction mortgage process, specifically the draw schedule. Unless you have sufficient cash resources to fall back on while you are building your home, you can experience lengthy delays.
Private lenders are not held to the same rigid policies as banks, so they can offer more flexible options, including unlimited draws.
You need a quick approval
If you find yourself in a situation where you need to obtain mortgage financing on a rush basis, a private mortgage lender may be your best bet.
Often, traditional lenders can take several weeks to process a mortgage from when you apply to when the mortgage advances. However, most private mortgage lenders can obtain approval within 1-2 business days and process the loan within 1-2 weeks. In a rush situation, you may be able to obtain funding in as little as 72 hours for an additional fee.
You can use a private lender to fund your mortgage on time and then move it to a bank or credit union later.
List of Private Mortgage Lenders in Ontario
This is a list of private lenders whose main offices are in Ontario. Remember, you can also find many national lenders that are not headquartered Ontario by using the search filters higher on this page. If you know about a lender in Ontario that’s not on this list, let us know! You can tell us by sending a message through the contact form.
|Corwin Mortgage Capital
|North York, Ontario
|Indigoblue Mortgage Investment Corporation
|Pillar Financial Services Inc.
|Sharbot Lake, Ontario
|RESCO Mortgage Investment Corporation
|Richmond Hill, Ontario
|Romspen Investment Corporation
|Royal Canadian Mortgage
|Timbercreek Financial Corporation
|Tribecca Finance Corporation
Frequently Asked Questions
Generally, getting approved for a mortgage with a private lender is easier than through a bank. That’s because private lenders don’t look as closely at your credit history or your income. They are more concerned with the property’s value and how much equity there is.
For example, if you can provide 25% or more equity, a private mortgage lender will likely approve the deal, regardless of credit history or income. Keep in mind that they will almost always want to complete a full property appraisal to determine an accurate value.
While private mortgage lenders don’t face the same regulations as banks, that doesn’t mean they aren’t regulated. In Ontario, the Mortgage Brokerages, Lenders, and Administrators Act (MBLAA) outlines how private lenders must conduct their businesses.
The Act requires them to adhere to specific standards of practice and provide proper cost of borrowing and other disclosures to borrowers, among other things.
Using a private mortgage as intended can be a valuable tool to help you reach your home ownership goals sooner. However, there are risks involved if you cannot qualify for a mortgage through a traditional lender by the end of the private mortgage term.
If you don’t have a clear 1-3-year exit strategy, you could get stuck paying high-interest costs for an extended period. You may also face additional mortgage fees, which can be costly.
To make a successful exit from a private mortgage, you’ll want to address why you’re dealing with them in the first place. For example, if it was due to poor credit, work to build your credit history and pay off any delinquent loans before your private mortgage term expires.
If you couldn’t satisfy the Prime lender’s income requirements, take the necessary steps to meet their conditions the next time around.
While the costs vary, most private lenders charge application and administration fees of 2% or more. For example, if you took out a $100,000 mortgage and the fee was 3%, your cost would be $3000, over and above the mortgage interest charges.
Private lenders are usually backed by individual investors (e.g., retired people) who want to earn dividends. The investors get most of the interest paid by the borrower. The lender itself makes money from the lender fee at origination and by managing the pool of mortgages to earn a management fee.