What is a Private Mortgage and When Does it Make Sense?

What Is a Private Mortgage?

A private mortgage is a loan secured against real estate — just like a bank mortgage — but funded by a private lender rather than a financial institution. Private lenders are typically individual investors or private mortgage funds who lend their own capital, making approval decisions based primarily on the property's value and equity rather than the borrower's income or credit profile. They are not subject to the federal stress test and are not required to follow OSFI guidelines.

When Private Mortgages Make Sense

Credit repair: If your credit score has been damaged by missed payments, consumer proposal, or bankruptcy, institutional lenders will decline for a set period after the event. A private mortgage can provide financing now — bridging the gap while your credit rebuilds — with a plan to refinance to conventional rates in 12–24 months.

Self-employed income gaps: Borrowers who are newly self-employed, have irregular income, or have recently changed business structure may not meet A-lender criteria. Private financing can cover the interim period.

Property type or condition: Institutional lenders require properties to be in good condition and meet certain valuation standards. If you're purchasing a home that needs significant renovation, or a property type that lenders are uncomfortable with — rural, unusual construction, zoning issues — private lenders will often look at equity rather than condition.

Urgent timing: Private lenders can often fund within days rather than weeks — critical when a deal has an aggressive closing timeline that a bank's underwriting process can't meet.

Bridge financing: When you've purchased your next home before your current home has sold, bridge financing covers the gap period. Private lenders can arrange this quickly when institutional bridge programs are unavailable.

What to Expect: Rates and Terms

Private mortgage rates in the Ottawa market typically range from 8% to 12%+ depending on the lender, the loan-to-value ratio, and the risk profile of the file. Most private mortgages are 1-year or 2-year terms — they are not designed as long-term financing solutions. Lender fees of 1–3% of the mortgage amount are common, plus legal fees on both sides of the transaction.

These costs sound significant — and they are — but they need to be viewed against the alternative. If a private mortgage allows you to complete a purchase, stop a power of sale, or bridge a critical gap, the cost is often worthwhile.

The Bridge to Conventional Financing

The most effective way to use a private mortgage is as a planned, temporary solution with a clear exit strategy. Jessy structures private mortgage files with the end goal explicitly defined: what needs to happen — credit score reaches a target threshold, two years of self-employment complete, renovation finished — to refinance into conventional A-lender financing. With that roadmap, the private mortgage term feels intentional rather than trapped.

Working with a Broker to Find Private Lenders

The private mortgage market is relationship-driven and not publicly accessible. Brokers maintain working relationships with private lenders and mortgage investment corporations (MICs) — the networks through which most private financing actually flows. Jessy works with a range of private lenders across the risk spectrum, and can match the right private lender to your specific situation.

If you're in a situation where a bank has said no, or where timing or property type makes institutional financing unlikely, see our private mortgage page or book a consultation to review your options.