The basic difference
A traditional mortgage comes from a bank or credit union, follows strict federal lending guidelines, and is priced primarily on your credit score, income documentation, and debt ratios. A private mortgage comes from an individual investor, a small lending company, or a pool of investors, and is priced primarily on the property's equity — meaning the loan-to-value ratio matters more than your T4 slip. That single shift — equity-based lending instead of income-based lending — is what opens the door for a lot of people banks turn away.
Who actually uses private lending
Private lending serves borrowers with strong property equity whose circumstances, documents, or timelines do not fit a conventional lender's requirements.
- Self-employed borrowers whose income looks great on paper over a few years but doesn't fit neatly into a bank's documentation requirements
- People rebuilding credit after a rough financial stretch, who need a bridge back to qualifying for traditional financing later
- Investors and builders who need financing to close quickly on a deal, faster than a bank's underwriting timeline allows
- Homeowners facing a time-sensitive situation — a looming power of sale, a tax deadline, or a closing date that a bank simply can't match
What it costs, honestly
Private mortgages carry higher interest rates than bank mortgages, along with lender and broker fees. There's no getting around that — it's the cost of faster approval, more flexible underwriting, and less paperwork. The right way to think about it isn't “is this expensive compared to a bank rate” but “is this the right bridge to get me from where I am to where I need to be.” For someone who needs 12–18 months to stabilize income or credit before refinancing into a conventional mortgage, a private mortgage at a higher rate for that window can be a completely reasonable trade-off. For someone planning to hold that rate for 25 years, it usually isn't the right long-term tool.
What lenders actually look at
A private lender's review centres on the property, the requested loan, and a realistic plan for repaying it.
- Loan-to-value. How much equity exists in the property relative to the loan amount
- Property type and location. More liquid, easily resold properties in stronger markets tend to get better terms
- Exit strategy. How and when the loan is expected to be repaid — refinance, sale, or another source of funds
Fast closings are real, but “fast” still means organized
One of the genuine advantages of private lending is speed — closings in a matter of days rather than weeks are common. But that speed depends on having your documentation and property information ready to go. The bottleneck is rarely the lender; it's usually how quickly the paperwork on the borrower's side comes together.
The bottom line
Private mortgage lending isn't a last resort or a red flag — it's a specific tool that solves specific problems: speed, flexibility, and access for borrowers who don't fit a conventional underwriting box. It's not the cheapest option on the table, and it's not meant to be. It's meant to be the option that actually says yes when timing or circumstances matter more than getting the lowest possible rate. If you're not sure whether your situation calls for a conventional mortgage, a private one, or something in between, the fastest way to find out is to walk through your actual numbers with someone who works across all three.
Frequently asked questions
- Who is a private mortgage typically for?
- It may suit borrowers with sufficient property equity who need more flexible qualification or a faster closing than a conventional lender can provide, including some self-employed homeowners, investors, and people rebuilding credit.
- Are private mortgages intended as long-term financing?
- Usually not. They are commonly used as short-term bridge financing with a defined plan to refinance, sell the property, or repay from another source.
- What matters most to a private mortgage lender?
- The central considerations are loan-to-value, the property's type and location, and a credible exit strategy for repaying the mortgage.
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.