When should I consider a private mortgage?

When you have meaningful home equity but cannot qualify with a bank or B lender, and you have a short-term need with a clear exit plan such as a future refinance or sale.

Why are private mortgage rates so high?

Private lenders take on more risk and lend mainly against equity rather than income or credit. Higher rates and fees compensate for that risk and the short, flexible nature of the loan.

How long do private mortgages last?

Usually six to twelve months. They are designed as short-term solutions, so most borrowers aim to refinance into a lower-cost mortgage or sell the property before the term ends.

Mortgage Glossary

What is Private Mortgage Lender?

A private mortgage lender is an individual, group, or company that lends its own funds secured against real estate, deciding mainly on the property's equity rather than the borrower's income or credit. Private mortgages carry higher rates and fees and short terms, often one year. They are typically used as short-term solutions.

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Quick answer

Also known as: private mortgage lender, private money lender, MIC lender

Key points

Private lenders fund mortgages from their own capital, focusing mainly on equity.
They lend when banks and B lenders decline, based on loan-to-value rather than income.
Rates and fees are high and terms are short, often six to twelve months.
Many private mortgages are interest-only and used as a temporary bridge.
A clear exit plan, refinance or sale, is essential before signing.

Private Mortgage Lender explained

Private lenders include individual investors, mortgage investment corporations (MICs), and syndicates that fund mortgages outside the regulated bank and monoline channels. Their key focus is the equity in the property, the loan-to-value ratio, rather than strict income verification or credit scoring, which makes them an option when banks and B lenders both say no.

Because private lending is higher risk, interest rates are well above prime, lender and broker fees are common, and terms are short, frequently six to twelve months. Many private mortgages are interest-only. Borrowers usually treat them as a bridge to fix a problem, then exit by refinancing or selling once their situation improves.

What a Private Mortgage Lender is for

Private mortgages exist for situations that fall outside conventional lending, such as urgent closings, unusual properties, major credit issues, or short-term cash needs against home equity. When timing or circumstances rule out a bank or B lender, a private lender can provide capital quickly because the decision rests largely on equity.

How it can help you

A private mortgage can solve a short-term problem, completing a purchase, consolidating debt, or buying time, when no other lender will fund the deal. The trade-off is cost, so it should be a deliberate, time-limited choice with a clear exit plan. Lenderoo shops 40+ lenders for free, so you can confirm whether a private mortgage is truly necessary or whether a lower-cost option fits.

When it comes up

Private lenders come up when a homeowner faces a tight closing date and needs financing fast, or when significant equity exists but income or credit will not support a bank approval. A private second mortgage might cover an urgent need for a year while the borrower repairs credit and lines up a refinance with a mainstream lender.

Example: Short-term private second mortgage

Imagine a homeowner with a property worth $700,000 and a first mortgage of $400,000, leaving $300,000 in equity. They need $50,000 quickly but cannot qualify with their bank right now.

A private lender offers a one-year, interest-only second mortgage of $50,000 at a rate around 10%, plus a fee of roughly two percent ($1,000). The interest-only payment is about $415 a month. The homeowner uses the year to improve their file, then refinances both mortgages into one lower-rate loan with a mainstream lender.

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Questions & answers

Private Mortgage Lender: frequently asked questions

Common questions Canadians ask about private mortgage lender.

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Related mortgage terms

B Lender (Alternative Lender)

A lender that serves borrowers who don't fit the strict criteria of prime A lenders.

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Second Mortgage

An additional loan secured against a property that already has a first mortgage registered on its title.

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Equity

The difference between a home's market value and outstanding mortgage balance

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Loan-to-Value Ratio (LTV)

The ratio of the mortgage amount to the property's value, shown as a percentage.

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Lender

A financial institution or company that provides the money for a mortgage.

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Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary

Mortgage Glossary

What is Private Mortgage Lender?

Find my best mortgage Back to glossary

Quick answer

Also known as: private mortgage lender, private money lender, MIC lender

Key points

Private lenders fund mortgages from their own capital, focusing mainly on equity.
They lend when banks and B lenders decline, based on loan-to-value rather than income.
Rates and fees are high and terms are short, often six to twelve months.
Many private mortgages are interest-only and used as a temporary bridge.
A clear exit plan, refinance or sale, is essential before signing.

Private Mortgage Lender explained

What a Private Mortgage Lender is for

How it can help you

When it comes up

Example: Short-term private second mortgage

Imagine a homeowner with a property worth $700,000 and a first mortgage of $400,000, leaving $300,000 in equity. They need $50,000 quickly but cannot qualify with their bank right now.

Have a question about private mortgage lender?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Private Mortgage Lender: frequently asked questions

Common questions Canadians ask about private mortgage lender.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary