The three types of private lender
Mortgage investment corporations pool investor money and lend under set guidelines, which makes them predictable and generally cheaper. Syndicated or individual investors are funded by one or a few people and can be more flexible on unusual properties, but pricing is negotiated case by case. Institutional alternative lenders sit closest to the banks: better rates, more paperwork, and a real underwriting process.
- Mortgage investment corporations: consistent guidelines, competitive pricing
- Individual investors: flexible on unusual files, price varies
- Alternative institutional lenders: lowest private-range cost, more documents
Compare the full cost, not the rate
A lender quoting a lower interest rate with a higher lender fee can easily cost more over a one-year term than a slightly higher rate with a modest fee. Ask for the total cost of borrowing over the term, including the lender fee, broker fee, legal fees, appraisal, and any renewal or discharge charges. Ontario brokers are required to disclose this in writing before you sign.
Questions worth asking before you commit
The right lender for a twelve-month bridge is not always the right lender for a file that needs two years of credit repair. Get the answers in writing.
- What is the total cost of borrowing over the full term?
- Are payments interest-only, and is there a prepayment privilege?
- What is the renewal fee if I need a second year?
- Is there a penalty for paying out early?
- Will the lender consider a rate reduction once payments season?
Red flags
Be cautious with any lender or broker who asks for large upfront fees before a commitment is issued, refuses to put costs in writing, pressures you to sign the same day, or cannot explain how you will exit the mortgage. Ontario mortgage brokerages are licensed by FSRA, and you can verify a licence before you send documents.
The broker's job
A good broker does not send your file to one lender. They know which lenders like which properties, who funds quickly, who tolerates arrears, and who is realistic on appraisal values. That shopping process is where most of the savings on a private mortgage actually come from.
Frequently asked questions
- Are private mortgage lenders regulated in Ontario?
- The brokerage arranging the mortgage is licensed and regulated by FSRA, and disclosure requirements apply to every private deal. Individual private lenders themselves are not licensed the way banks are.
- What rate should I expect on a private mortgage?
- Pricing depends on position, loan-to-value, property type, and location. A first mortgage in the GTA prices well below a high-ratio second on a rural property.
- How long should I stay in a private mortgage?
- Twelve to twenty-four months is typical. Anything longer usually means the exit strategy was never built properly.
Talk to a Toronto private mortgage specialist
We arrange equity-based financing across Toronto and the GTA, whether you need a first position from a private lender or a second mortgage behind the bank you already have.