Private mortgage decisions are hard to picture in the abstract. These three constructed scenarios show the shape of a well-structured file, a marginal one, and one where the right answer was to decline.
Illustrative scenario one: self-employed, waiting on a tax year
Hypothetical situation. A self-employed contractor owns a home with substantial equity. Business is strong but the most recent tax return shows modest income after deductions. An A-lender declines a refinance needed to consolidate business debt.
Structure. A twelve-month private first mortgage at a conservative loan-to-value, interest-only, arranged through a licensed brokerage with all fees disclosed in writing before signing.
Exit. File the next tax year showing income that supports conventional qualifying, then refinance to an A-lender. Payment history on the private mortgage becomes supporting evidence.
Why this one works. Real equity, a defined problem, and a dated exit tied to a filing cycle. All three ingredients present.
Illustrative scenario two: arrears and an enforcement deadline
Hypothetical situation. A homeowner falls behind after an income interruption. The lender begins enforcement. There is meaningful equity but the default disqualifies conventional refinancing.
Structure. A private mortgage large enough to clear the arrears and the lender’s enforcement costs, stopping the process. Higher cost, short term, closing quickly because the deadline is real.
Exit. Income has recovered, so the plan is clean payment history for a period, then a conventional refinance.
Why this one is marginal. It only works because the income recovered. Had it not, the loan would have postponed an enforced sale rather than preventing one, at meaningful cost. The exit here rests on an assumption, not a certainty, and it should be tested hard before proceeding.
Illustrative scenario three: the file we would decline
Hypothetical situation. A homeowner wants to consolidate unsecured debt into a second mortgage. Equity is thin. Household income has fallen permanently after a change in employment, and the proposed new payment consumes most of the remaining monthly surplus.
Why a private mortgage is the wrong tool. There is no exit. Nothing in the situation will change within twelve months to make conventional refinancing available. The payment is barely affordable on day one, meaning any further setback triggers default, and the debt would now be secured against the home rather than unsecured.
The better conversation. A licensed insolvency trustee or accredited credit counsellor, or a controlled sale on the homeowner’s own timeline. Both preserve more than an enforced sale would.
Why we include this. Because a page showing only successful scenarios would misrepresent the product. Declining files like this is a normal part of doing the job properly.
What the three have in common
Equity, a defined problem, and a realistic exit. The first has all three. The second has two and an assumption. The third has none, which is why the answer is no.
Read the full guide for your province: Private Mortgage Lending in Ontario or Private Mortgage Lending in Alberta.