Private Mortgage Lenders in Canada (2026): How They Work, What They Cost, When They Save the File

You missed three mortgage payments. The lender filed for power of sale. The auction is in 60 days. Big-6 said no, B-lender said no, you have $180,000 of equity and no time.

This is when private mortgage lenders matter. Used right, a private mortgage buys you 12 months to refinance back to conventional or sell on your own terms. Used wrong, you stack 18% all-in cost on a balance you cannot exit and end up in the same forced sale you were trying to avoid.

Here is exactly how private mortgages work in Canada in 2026, what they actually cost, and the exit strategy you must define before signing anything.

What a Private Mortgage Actually Is (And Who Funds It)

A private mortgage is a residential mortgage funded outside the regulated bank and credit union system. The funders are Mortgage Investment Corporations (MICs) — pooled investor entities licensed under provincial securities law — and individual private investors syndicated through licensed mortgage brokers.

MICs are the larger and more standardized half of the market. Major Canadian MICs include Romspen, MCAN, Atrium MIC, Antrim Investments, Cooper Pacific, Northwest Capital, and Lanyard Financial. Each MIC publishes lending criteria — typical maximum LTV, minimum loan amount, geographic coverage, property type acceptance.

Individual private investor mortgages are smaller, often more flexible on file specifics, and arranged through brokers who maintain relationships with high-net-worth investors looking for secured returns of 9-13%.

Both groups underwrite primarily on equity and exit strategy. Credit score, income documentation, and employment history are secondary considerations. A private lender will fund a mortgage to a borrower with a 520 score, no T4 income, and an active consumer proposal — provided the equity supports the LTV they are willing to lend to and the exit strategy is credible.

The cost of that flexibility is rate, fees, and term length. Private mortgages are not designed as long-term financing. They are bridge capital — a short-duration loan that solves an immediate problem while the borrower works toward a permanent solution.

When a Private Mortgage Is the Right Answer

Five common use cases.

Stop foreclosure or power of sale. First mortgage in arrears, lender has filed for power of sale, court date scheduled. Private first mortgage funds enough to bring the existing first mortgage current (or pay it out entirely), plus pay arrears on property tax, condo fees, and any CRA liens. Closing in 7-14 days is realistic.

Fund a CRA tax debt payoff. Active CRA collection — wage garnishment, bank freeze, set-off — is destroying cash flow. Private second mortgage funds the CRA balance directly. CRA collection stops the day the payment hits. Borrower has 12 months to refinance the higher-cost second into a lower-cost B-lender consolidation once income recovers.

Bridge between sale and purchase. Sold the existing home but the proceeds are not available for the new home closing. Private bridge mortgage funds the down payment for 30-90 days. Repaid from sale proceeds.

Exit a consumer proposal with home intact. Active consumer proposal, payment is straining cash flow, proposal can be paid out early at a discount. Private mortgage funds the lump-sum payout, removes the proposal from the credit file 3 years sooner, and accelerates credit recovery.

Finish a renovation that ran out of cash. Construction or major renovation incomplete, contractor demanding payment, no other capital available. Private mortgage funds the remaining work. Repaid when the property sells or refinances at completion.

The unifying feature: a clear, time-bound problem that conventional financing cannot solve in the available window. Private mortgages buy time — they do not solve the underlying financial picture.

The Real Cost: Rate, Lender Fee, Broker Fee, Legal Fee

Four cost components on every private mortgage.

A $50,000 private mortgage at 11.99% with 2% lender fee, 1% broker fee, and standard legal costs:

• Lender fee: $1,000 (added to balance — borrower receives $50,000, owes $51,000)
• Broker fee: $500 (deducted from advance — borrower receives $48,500 net)
• Legal cost: $1,800 (paid out of advance — borrower receives $46,700 net)
• Year 1 interest on $51,000: $6,115
• Net cash to borrower: $46,700
• Year 1 cost (interest + fees): $9,415

Effective Year 1 APR including fees: about 18.7% on the $46,700 net advance.

A $100,000 private second mortgage at 12.99% with 2.5% lender fee, 1.5% broker fee:

• Lender fee: $2,500 (added to balance)
• Broker fee: $1,500 (deducted from advance)
• Legal: $2,500 (deducted)
• Year 1 interest on $102,500: $13,315
• Net cash to borrower: $96,000
• Year 1 cost: $17,315
• Effective Year 1 APR: about 18%

Read the lender commitment letter carefully. Some lenders include a “renewal fee” of 1-2% if the term needs to extend. Some charge a “discharge fee” of $300-$700 at payout. Some include an interest reserve held back from the advance — meaning the borrower receives even less cash than expected.

The all-in cost matters more than the headline rate. A “9.99% private mortgage” with 3% lender fee, 2% broker fee, and a 6-month term is more expensive than an “11.99% private mortgage” with 1% lender fee, 0.5% broker fee, and a 12-month term once you compute the effective annualized cost on the cash you actually receive.

Term Length and the Exit Strategy You Need

Most private mortgages are 3-12 month terms. A few extend to 24 months. Almost none are 5-year mortgages — that is not the product.

The short term is the structural feature, not a bug. Private lenders price short-duration capital. They expect borrowers to refinance out at the end of the term. The interest rate covers the risk premium for short capital deployment, not for long-term residential lending.

Your exit strategy must be defined and credible before you sign.

Exit Strategy 1 — Refinance to B-lender. Most common. Use the term to rebuild credit, re-establish income, or wait out a temporary issue. Refinance to a B-lender at 7-9% at term end. Cost difference: B-lender saves 4-5% per year vs the private mortgage.

Exit Strategy 2 — Refinance to A-lender. Aspirational but realistic for borrowers whose only issue was a temporary income gap or a now-resolved credit blip. Score recovery to 680+, full income documentation, qualifying ratios within OSFI guidelines.

Exit Strategy 3 — Sell the property. When the underlying file does not support a long-term hold (e.g., income permanently reduced, inherited a home you cannot maintain, condo with rising fees), the private mortgage buys time to sell on your terms rather than at auction. Net out the sale proceeds, pay off the private, walk away with whatever equity remains.

Exit Strategy 4 — Consumer proposal handles the underlying debt. When the unsecured debt that triggered the cash flow crisis is the real issue, a consumer proposal during the private mortgage term can reduce the broader debt picture by 60-80%, restore cash flow, and make refinance qualification easier at term end.

If none of these four exit strategies are credible at signing, do not take the private mortgage. The lender does not care if you can refinance at maturity — they have your home as collateral. They will renew at higher cost or move to power of sale. You absorb the loss, not them.

Risks: Power of Sale, Renewal Risk, Equity Stripping

Three risks that catch borrowers most often.

Power of sale at term end. If the private mortgage matures and you cannot refinance or sell in time, the lender can commence power of sale proceedings (or judicial sale in Quebec). Power of sale is faster than the original mortgage default process — often 60-90 days from notice to auction. Equity loss can be substantial because the auction price often falls below market value.

Renewal risk. Private lenders are not obligated to renew. Even if you have made every payment, the lender may decline to extend the term. If you cannot refinance and cannot sell, you are forced into an emergency outcome.

Equity stripping through fees. Each layer — lender fee, broker fee, legal — eats into the available cash. On a $50,000 advance, $4,300 in fees and legal can leave you with $45,700 net. After 12 months at 11.99%, you owe $52,000+ on a balance you only received $45,700 of. If the property has appreciated, the equity loss is offset by appreciation. If flat or declining, you are upside down on the second.

Scenario: Felix from Vaughan, ON, $750,000 home, 4 months in arrears on a $480,000 first mortgage. Power of sale filed. Equity at risk: about $180,000 above secured debt. Felix took a private first mortgage at 11.99% for 12 months, $510,000 advance. Lender fee $10,200, broker fee $5,100, legal $3,500 — net $491,200 to fund existing mortgage payoff plus arrears. He sold the home in month 9 for $735,000 (slightly under list, motivated by deadline). After paying out the $510,000 + accrued interest of $51,000, he netted about $174,000 — $6,000 less than if he had sold without the private bridge, but with full control over the sale process and no power of sale on his record.

Another scenario: Sarah from Surrey, BC, $42,000 CRA tax debt + score 580 + active garnishment. Private second mortgage at 12.49% for 12 months, $48,000 advance. Lender + broker + legal fees $4,800. CRA paid in full, garnishment stopped immediately. Sarah had 12 months to recover her credit and refinance. By month 11, score was 642, income stable, recent CRA payment showing on credit. Equitable Bank refinanced the second mortgage into a consolidated B-lender first at 7.99% — saving Sarah about $3,500/year for the remaining mortgage life.

How to Use a Private Mortgage Without Getting Trapped

Five rules.

1. Define the exit strategy in writing before signing. What is the refinance target lender, expected rate, expected approval criteria? When will you start applying? What is the trigger for selling instead of refinancing?
2. Negotiate every fee. Lender fee, broker fee, legal cost — all are negotiable on cleaner files. The first quote is rarely the best quote.
3. Get 2-3 quotes through a broker. The private lending market is opaque. Different lenders have different appetites for different files. A broker with 10+ private investor relationships will often surface a quote 1-2% better than the first one offered.
4. Read the renewal terms. Confirm what happens at maturity if you cannot refinance — renewal terms, default rates, power of sale timeline.
5. Set a calendar reminder for month 6 to start the refinance application. Do not wait until month 11. Refinances take 30-60 days. Bank stalls happen. The earlier you start, the more options you have.

A broker comparison is the single highest-leverage action. The Casavo network covers private lenders alongside B-lenders and A-lender refinances — meaning a single soft-pull conversation surfaces quotes across all three tiers and lets you see which one your file actually qualifies for.

For deeper context on how private mortgages compare to consumer proposals, see Can a Consumer Proposal Stop Foreclosure? and Sell Your House Before Power of Sale?.

Bottom Line

Private mortgages are bridge capital, not long-term financing. Used correctly — clear exit strategy, term-appropriate problem, real equity behind the deal — they save homes that conventional financing cannot reach in time.

Used incorrectly — no exit plan, hoping to refinance someday, signing the first quote — they accelerate the loss they were supposed to prevent.

Three actions before signing any private mortgage. Confirm your equity (current home value minus secured debt). Get 2-3 quotes through a broker, not directly from one lender. Define the exit strategy and the trigger date for executing it.

The cost is high. The product works. The discipline is what separates a saved home from a faster forced sale.