July 16, 2025
For many years, private mortgages were seen as a last-ditch solution—something people only turned to in financial emergencies. But in 2025, that perception has changed. Private lending is now a legitimate, strategic option for many Canadian homeowners and buyers who simply don’t meet the strict criteria of traditional banks. With tighter stress test rules, more gig and self-employed workers, and a growing number of people with bruised credit, private mortgages are no longer just for those in trouble—they’re for anyone who doesn’t fit the "A-lender" mold.
A private mortgage is a short-term loan—typically one to two years—offered by individual investors or specialized lenders instead of major financial institutions. These loans are structured with principal and interest payments and are secured by real estate. Unlike traditional banks that require extensive income documentation and high credit scores, private lenders base their decisions more on the property’s equity and overall risk.
In the past, private mortgages were mainly used in urgent situations, like avoiding foreclosure, paying off tax arrears, or dealing with legal judgments. While they still serve that purpose, the modern use case has expanded. Today, homeowners use private mortgages strategically—to bridge gaps, finance renovations, consolidate debt, or simply buy time to qualify for better financing in the future.
For example, many self-employed individuals have solid incomes but don’t show enough on paper to satisfy a bank’s underwriting guidelines. Private lenders will often take a common-sense approach and approve deals that make sense, even if the tax returns don’t tell the full story. Similarly, borrowers with lower credit scores—say, under 680—may be turned away by traditional lenders but can still qualify for private financing, giving them time to rebuild their credit and refinance later.
Private mortgages also play a key role in real estate transactions with tight deadlines. Need to close quickly? Private lenders can often fund within days, making them an ideal option for competitive purchases or bridge loans. They’re also useful for unique or non-conforming properties—such as rural homes, rental units, or buildings with zoning or permit issues—that banks typically avoid.
Yes, the interest rates are higher—usually in the 7% to 12% range—but with that cost comes speed, flexibility, and accessibility. And because these loans are typically short-term, they can provide the breathing room borrowers need to stabilize their finances or reposition themselves for better mortgage options down the line. For those with a clear plan, the added cost can be a worthwhile tradeoff.
The key to making a private mortgage work is to treat it as a short-term tool—not a long-term solution. Use it to buy the home, access your equity, or get through a transitional period. Then, when the time is right, refinance into a B lender or A lender mortgage with better terms. This stepping-stone approach has helped many buyers and homeowners make smart moves in today’s tough lending environment.
If you’ve been turned down by a bank or aren’t sure where to turn next, a private mortgage could be the right fit. It’s no longer a sign of financial distress—it’s a flexible, fast, and increasingly common strategy to help Canadians move forward with confidence.
Source: Absolute Mortgage Team