A private mortgage can provide temporary financing when a traditional mortgage does not fit your current circumstances. For Ontario property owners, the decision should involve more than obtaining approval: it should include understanding the full cost, meeting the payments and knowing how the mortgage will be repaid.
At True North Financing, we help borrowers explore private mortgage options based on their property, financing needs and repayment plans.
What Is a Private Mortgage?
A private mortgage is a loan secured against real estate and funded by a private lender rather than a traditional bank or credit union.
Private mortgages are generally intended as short-term financing. They often carry higher interest rates and fees than traditional mortgages. Some require interest-only payments, which means the principal balance does not decrease through those payments.
Having equity in your property does not automatically make a private mortgage suitable or guarantee approval.
When Might You Consider Private Financing?
You may want to discuss private financing if you have a temporary financing gap, face challenges qualifying with a traditional lender or need to assess borrowing options against an existing property.
Start by explaining the specific problem the financing needs to solve:
- How much money do you need, and for what purpose?
- What is preventing you from using a lower-cost option today?
- How will you cover the payments?
- What will change before the mortgage becomes due?
These questions help establish whether borrowing addresses the underlying issue or simply postpones it.
Understand the Total Borrowing Cost
The interest rate is only one part of the commitment. Ask for a written breakdown of applicable lender, brokerage, legal, appraisal and administrative charges, along with any renewal or discharge costs.
Before signing, make sure you understand:
- The amount you will actually receive after deductions.
- Your payment amount and schedule.
- Whether payments reduce the principal.
- The balance due at maturity.
- The conditions and charges for early repayment.
- What a renewal could cost, if one is available.
Ask who receives each fee and when it becomes payable. Comparing these details helps you evaluate the full proposal rather than focusing only on the monthly payment.
Plan Your Exit Before You Borrow
An exit strategy is a realistic plan for repaying the private mortgage. It should be considered before the loan is arranged.
Depending on your circumstances, the plan might involve qualifying for another mortgage or selling the property. Each approach needs a credible timeline and supporting information.
If refinancing is the plan, identify what must improve—such as income documentation, credit history or debt levels—and confirm what a future lender would need to assess.
If selling is the plan, consider the time required to sell, selling expenses and the funds needed to repay the mortgage.
Hoping that rates will fall or property values will rise is not a dependable repayment plan. Discuss what happens if your preferred exit takes longer than expected.
Recognize the Risks
A private mortgage is secured against your property. Failing to meet the mortgage obligations can put that property at risk.
Repeated renewals and additional fees can also reduce your remaining equity. Do not assume that an affordable initial payment means the mortgage will remain manageable at maturity.
The objective should be financing that fits both your immediate needs and a realistic path forward.
Discuss Your Private Mortgage Options With TNF
Before your consultation, gather your latest mortgage statements, details of your property, the amount you need, your income information and your proposed repayment timeline.
True North Financing can help you review available options, understand proposed costs and terms, and assess the next steps for your situation.
Contact TNF to discuss your private mortgage needs, or call 647-456-3424.
Mohan Malhotra — Mortgage Agent Level 2
Licence #M11001890
Lending Hub — Brokerage #12566
Financing is subject to lender approval, property assessment and borrower circumstances. This article provides general information; suitability depends on your individual situation.
Further reading: FSRA’s guide to private mortgages.
