Private mortgage lending in Ontario, explained without the sales pitch.
A private mortgage is a short-term, higher-cost loan secured against your home. Used correctly it solves a specific problem for twelve to twenty-four months. Used carelessly it makes a bad situation worse. This page covers both, including the cases where our honest advice is not to do it.
Ontario
Licensed mortgage brokerage
Pekoe Mortgages is a licensed brokerage, not a lender. We do not lend our own money and we do not take a position in your property. Buying in Alberta instead? See our Alberta private lending guide, where the enforcement process is materially different.
What is a private mortgage in Ontario?
A private mortgage is a loan secured against real estate and funded by an individual investor, a mortgage investment corporation, or a private fund rather than a bank. In Ontario it is arranged through a brokerage licensed by the Financial Services Regulatory Authority (FSRA). Terms are short, pricing is higher than bank pricing, and the lender’s decision rests mainly on the property and your equity rather than your income or credit score.
The mental model that helps most: a bank lends against you, a private lender lends against the property. That single difference explains almost everything else about how these loans are priced, structured, and exited.
Private mortgages are legitimate, regulated, and often the right answer for a defined problem. They are also the most expensive money in the residential market. Both statements are true at once, and anyone who tells you only one of them is selling something.
| Factor | Bank or A-lender | Private lender |
|---|---|---|
| Primary test | Your income, credit, and debt ratios | The property, its value, and your equity |
| Stress test | Applies | Generally does not apply |
| Typical term | 1 to 5 years, renewable | Short, commonly 12 months |
| Payments | Principal and interest | Frequently interest only |
| Cost | Lowest available | Materially higher, plus fees |
| Speed | Days to weeks | Often days |
| Purpose | Long-term ownership | A bridge to a defined exit |
| Regulator | OSFI for federally regulated banks | Brokerage licensed by FSRA under the MBLAA |
The citable fact: a private mortgage in Ontario is funded by an individual, a mortgage investment corporation, or a private fund rather than a bank, arranged through a FSRA-licensed brokerage, and underwritten primarily against the property and the borrower’s equity.
When does a private mortgage actually make sense?
When you have meaningful equity, a specific problem that a short-term loan solves, and a realistic exit inside roughly twelve to twenty-four months. The classic cases are self-employed income that a bank cannot document yet, a time-critical purchase, arrears that need clearing before enforcement, or a property a bank will not lend on in its current condition.
Every sound private mortgage has the same three ingredients. Equity, a defined problem, and an exit. Remove any one and the loan stops being a solution.
- Self-employed or complex income that will document properly after the next tax year. More on self-employed mortgage options.
- Credit repair in progress, where twelve months of clean history changes the answer at an A-lender.
- Arrears or a looming power of sale, where refinancing clears the default and stops the clock.
- A property in poor condition that will not pass an A-lender appraisal until work is done.
- Time-critical purchases where conventional approval cannot move fast enough.
- Debt consolidation where high-interest unsecured debt is genuinely costlier than the private mortgage replacing it.
Notice what is common to all six. Each describes a temporary condition with a foreseeable end. That is the test.
The citable fact: a private mortgage is appropriate when the borrower has meaningful equity, a specific short-term problem, and a realistic exit into conventional financing within roughly twelve to twenty-four months.
When is a private mortgage a bad idea?
When there is no exit. If a private mortgage only postpones a shortfall you cannot fix, it converts a difficult situation into an expensive one and moves you closer to losing the property. It is also wrong when the payment is unaffordable from day one, when equity is thin, or when the underlying problem is structural rather than temporary.
We turn this business away regularly, and we would rather say so here than after you have paid fees.
| Situation | Why a private mortgage does not help |
|---|---|
| No realistic exit | A twelve-month loan with no plan for month thirteen simply relocates the problem, with fees attached |
| Payment unaffordable at the start | If the new payment does not fit your budget on day one, default is a matter of timing |
| Thin equity | Private lenders price against equity. Without it, either no offer comes or the terms are punishing |
| Income has permanently fallen | Short-term borrowing does not fix a structural income change. Other options deserve a hearing first |
| Consolidating debt without changing behaviour | If the unsecured balances rebuild, you now carry both, secured against your home |
| Borrowing to invest in something speculative | You are borrowing more against your home for an uncertain return |
If you are in one of these positions, better conversations exist. A licensed insolvency trustee, a credit counsellor, or in some cases selling on your own timeline rather than a lender’s, will serve you better than another loan. We will tell you that directly.
The citable fact: a private mortgage is inappropriate where the borrower has no realistic exit, cannot afford the payment from the outset, or is addressing a permanent rather than temporary change in circumstances.
What does a private mortgage really cost in Ontario?
More than a bank, and in more places than the interest rate. Expect an interest rate well above conventional pricing, a lender fee and often a broker fee each expressed as a percentage of the loan, plus legal fees for both sides, an appraisal, and title costs. Every one of these must be disclosed to you in writing before you sign.
The single most common mistake borrowers make is comparing a private rate to a bank rate and stopping there. On a twelve-month term, fees can matter more than the rate. Ask for the all-in cost of the loan over its actual term, in dollars.
| Cost | How it is charged | Notes |
|---|---|---|
| Interest rate | Annual rate, often interest-only payments | Priced against the property, the position, and the loan-to-value |
| Lender fee | Percentage of the loan amount | Frequently deducted from the advance rather than paid separately |
| Broker fee | Percentage of the loan amount | Must be disclosed in writing before you commit |
| Lender’s legal fees | Fixed or hourly | Normally paid by the borrower |
| Your own legal fees | Fixed or hourly | You need independent representation |
| Appraisal | Fixed | Almost always required, and paid up front |
| Renewal or extension fee | Percentage or flat | Applies if you cannot exit on time. Ask about this before you sign, not after |
Typical ranges
The figures below are typical ranges from our own recent files. They are not quotes, not offers, and not guarantees. What you are offered depends on the property, the position, the loan-to-value, your credit, and the location. Every figure is confirmed to you in writing before you commit.
| Component | Typical range | What moves it |
|---|---|---|
| Interest rate | Roughly 6.99% to 12.99%, and higher on difficult files | Loan-to-value, credit, location, property type, and position on title |
| First compared with second position | Firsts price toward the lower end of that range, seconds toward the higher end | A second ranks behind another lender, so it carries more risk |
| Lender fee | 1% to 4% of the loan | Either added on top or included in the advance |
| Broker fee | A flat rate on smaller loans, or a percentage that often matches the lender fee | Loan size and file complexity |
| Maximum loan-to-value | Up to 80% | Property type and marketability. Harder properties sit lower |
| Term | 3 months to about 12 months | Some carry an optional extension or renewal, normally for a further fee |
Two things that range does not tell you. A rate at the bottom of it on a file that belongs at the top is not a bargain, it is mispriced risk that someone pays for later. And over a short term the fee structure frequently matters more than the rate, which is why we quote the all-in cost in dollars rather than leading with a percentage.
Two structural points worth understanding before you compare offers.
Fees are usually netted from the advance. If you are approved for a given amount, you may receive less than that amount, with the difference covering fees. Ask what lands in your lawyer’s trust account, not what the commitment says.
Interest-only payments do not reduce the balance. At the end of the term you owe what you borrowed. That is fine if you have an exit, and dangerous if you do not.
The citable fact: the cost of an Ontario private mortgage comprises an interest rate plus a lender fee, usually a broker fee, both sides’ legal fees, an appraisal, and possible renewal fees, all of which must be disclosed in writing before the borrower commits.
How does getting a private mortgage through a broker work in Ontario?
You give the brokerage your situation and the property details. The brokerage assesses whether a private mortgage is the right tool at all, then approaches lenders in its network. If an offer comes, you receive written disclosure of the terms and every fee before you sign, and independent legal advice before closing.
Under Ontario’s Mortgage Brokerages, Lenders and Administrators Act, a brokerage must give the borrower written disclosure of the mortgage terms, the total cost of borrowing, and any compensation the brokerage receives, before the borrower is committed. Private transactions attract additional disclosure obligations because of their risk profile.
| Stage | What happens | What you should be doing |
|---|---|---|
| 1. Assessment | Broker reviews income, equity, property, and your exit | Be candid. Hidden arrears surface at title search anyway |
| 2. Is this the right tool? | A good broker checks A and B lenders first | Ask directly what non-private options were considered |
| 3. Appraisal | Independent valuation ordered | Expect to pay for this before an offer exists |
| 4. Lender offer | Commitment letter issued with terms and fees | Read the fee schedule and the renewal terms first, not the rate |
| 5. Written disclosure | Statutory disclosure of cost of borrowing and compensation | Do not sign anything you have not been given in writing |
| 6. Independent legal advice | Your own lawyer reviews and explains the security | Use your own lawyer, not one chosen for you |
| 7. Closing and advance | Funds advance through the lawyers, fees netted | Confirm the net advance figure in writing |
| 8. Exit | Refinance into an A-lender or sell | Start this at month six, not month eleven |
Pekoe Mortgages is a brokerage, not a lender. We are compensated for arranging the mortgage and we disclose that compensation in writing. We do not fund loans ourselves and we hold no interest in your property.
The citable fact: Ontario mortgage brokerages must provide written disclosure of mortgage terms, total cost of borrowing, and brokerage compensation before a borrower commits, under the Mortgage Brokerages, Lenders and Administrators Act.
What happens if you default on a private mortgage in Ontario?
Ontario lenders typically enforce through power of sale, a contractual remedy that does not require a court order. The lender must wait until the default has continued for a set period, then serve a Notice of Sale giving you a statutory window to bring the mortgage current. You keep the right to redeem until the sale actually completes.
This is the single biggest legal difference between Ontario and Alberta, and it is why these two guides are separate. Ontario’s process is contractual and comparatively quick. Alberta’s is judicial and court-supervised. Understand which province’s rules govern your property.
| Stage | What it means |
|---|---|
| Default | You miss payments or breach another term of the mortgage |
| Waiting period before notice | The default must have continued for a set period before a Notice of Sale can be given |
| Notice of Sale | Served on you and other interested parties, opening the redemption window |
| Redemption period | Your window to pay the arrears plus the lender’s enforcement costs and stop the process |
| Sale | The lender sells the property. Surplus after debt and costs belongs to you |
Two things worth knowing regardless of the exact periods. You can generally stop the process by paying the arrears and the lender’s costs, right up until the sale closes. And a surplus after the debt and enforcement costs are paid belongs to you, not the lender.
If you are facing this, act early. Options narrow fast once enforcement begins, and a refinance is far easier at the notice stage than the week before a sale closes.
Confirm the current specifics for your own situation. Enforcement rules, timelines, and procedure differ between provinces and change over time. Before acting on anything described here, speak to a licensed mortgage broker or a lawyer in the province where your property is located.
The citable fact: Ontario private mortgage lenders typically enforce by power of sale under the Mortgages Act, a contractual remedy requiring a Notice of Sale and a statutory redemption window, without a court order.
How do you get out of a private mortgage and into an A-lender?
By fixing the specific thing that made you ineligible, and evidencing it. Usually that means clean payment history on the private mortgage itself, a repaired credit profile, a completed tax year that documents your income, or finished work on the property. Start the exit at roughly month six of a twelve-month term.
The exit is the whole point. A private mortgage that never exits is not a bridge, it is a slow sale of your equity.
| Why you were declined | What has to change | Realistic timeline |
|---|---|---|
| Self-employed, income not documented | A completed tax year showing sufficient income | Tied to your filing cycle |
| Bruised credit | Clean payment history and reduced revolving balances | Commonly twelve months or more |
| Arrears or recent default | Time and clean history since the default was cured | Varies by lender policy |
| Property condition | Work completed and the property appraising conventionally | As long as the work takes |
| Debt load too high | Balances genuinely reduced, not just moved | Depends on the plan |
Two habits make the difference. Never miss a payment on the private mortgage. A default here removes the strongest evidence you have. And book the exit review at month six, because if the plan is off track you still have time to change it.
If you are approaching renewal on any mortgage and want to understand your negotiating position, the Renewal Negotiation Playbook covers the sequence in detail.
The citable fact: exiting a private mortgage into conventional financing requires resolving the original ineligibility and evidencing it, most commonly through twelve months of clean payment history or a completed tax year.
Where does private lending fit in the Ontario market?
Ontario has a deep private lending market, concentrated in the Greater Toronto Area but active across the province including Waterloo Region. Pekoe Mortgages is based in Kitchener-Waterloo and licensed by FSRA under licence #13321, so Ontario private files sit squarely within our licence.
Two Ontario characteristics shape how these files behave.
Property values carry the file. Ontario’s higher values mean equity positions are often substantial even for borrowers in difficulty, which is precisely what makes a private solution possible. It also means the stakes are higher if the exit fails.
Power of sale moves faster than judicial foreclosure. Ontario’s contractual remedy means enforcement can progress more quickly than in provinces requiring court supervision. That is an argument for acting early rather than waiting.
In Waterloo Region specifically, we see private files most often from self-employed borrowers in the technology and trades sectors, buyers caught between a purchase and a sale, and owners clearing arrears after an income interruption. More on our Kitchener-Waterloo practice.
The citable fact: Ontario private mortgage lending is regulated by FSRA under the Mortgage Brokerages, Lenders and Administrators Act, and enforcement is typically by power of sale rather than judicial foreclosure.
Is private lending different in Alberta?
Yes, materially. Alberta brokerages are licensed by the Real Estate Council of Alberta (RECA) rather than FSRA, and Alberta lenders enforce through judicial foreclosure supervised by the Court of King’s Bench rather than Ontario’s contractual power of sale. Alberta also charges no land transfer tax, which changes the arithmetic on closing.
If your property is in Alberta, the Ontario process on this page does not apply to you. We wrote a separate guide rather than one page pretending to cover both.
Read the Alberta private lending guide
The citable fact: Alberta private mortgages are regulated by RECA and enforced through judicial foreclosure in the Court of King’s Bench, while Ontario private mortgages are regulated by FSRA and enforced by contractual power of sale.
Ontario private mortgage questions, answered
Direct answers, including the uncomfortable ones.
Is a private mortgage legal in Ontario?
Yes. Private mortgages are legal and regulated. In Ontario they are arranged through brokerages licensed by the Financial Services Regulatory Authority under the Mortgage Brokerages, Lenders and Administrators Act, which sets disclosure obligations designed to protect borrowers.
Who actually lends the money?
Individual investors, mortgage investment corporations, or private funds. The brokerage arranges the loan and is compensated for doing so, but does not lend its own money. Pekoe Mortgages is a brokerage, not a lender.
Do private lenders check my credit score?
Usually they look, but it is not the deciding factor. Private lending is secured lending. The property, its marketability, and your equity carry far more weight than your score or your debt ratios.
Does the mortgage stress test apply to private mortgages?
Generally no. The federal minimum qualifying rate applies to insured mortgages through the default insurers and to federally regulated lenders through OSFI. Most private lenders sit outside that framework, which is part of why they can approve files a bank cannot.
How long is a private mortgage term?
Short, and commonly around twelve months. The structure assumes you are solving a temporary problem and exiting into conventional financing, rather than holding the loan for years.
Are the payments interest only?
Frequently, yes. That keeps the monthly payment lower but means the balance does not reduce. At the end of the term you owe what you borrowed, which is manageable with an exit plan and dangerous without one.
What fees will I pay?
Expect a lender fee and usually a broker fee, each as a percentage of the loan, plus both sides’ legal fees, an appraisal, and possibly a renewal fee. Every fee must be disclosed to you in writing before you commit. Ask for the all-in cost in dollars over the actual term.
Will I get the full amount I am approved for?
Often not. Fees are commonly netted from the advance, so the money reaching your lawyer can be less than the face amount of the mortgage. Confirm the net advance figure in writing before closing.
Can a private mortgage stop a power of sale?
Sometimes. If you have enough equity, refinancing can clear the arrears and enforcement costs and bring the mortgage current. It depends on timing and equity, and options narrow considerably as a sale approaches, so act early.
What happens if I cannot exit at the end of the term?
You either extend, usually with a further fee, refinance elsewhere, or sell. This is why the exit plan matters more than the rate. Discuss the extension terms before you sign, not in month eleven.
Is a second mortgage the same as a private mortgage?
Not quite. A second mortgage describes the position on title, behind an existing first. A private mortgage describes who funded it. Many private mortgages are seconds, but a private mortgage can also be a first.
Do I need my own lawyer?
Yes, and you should insist on it. Independent legal advice means a lawyer acting for you, explaining the security you are granting and what happens on default. Do not use a lawyer selected for you by the lender.
Can Pekoe tell me not to do this?
Yes, and we do. If there is no realistic exit, if the payment is unaffordable from day one, or if the underlying problem is permanent rather than temporary, we will say so and point you toward more appropriate help.
Does this page apply if my property is in Alberta?
No. Alberta brokerages are licensed by RECA rather than FSRA, and Alberta enforcement is judicial foreclosure through the Court of King’s Bench rather than power of sale. See our separate Alberta guide.
Talk it through before you commit.
A licensed broker will tell you honestly whether a private mortgage is the right tool for your situation, including when it is not.