Private Mortgage in Canada (2026): The Full Cost, the Exit Test, and What the Regulators Found

Private Mortgage in Canada (2026): The Full Cost, the Exit Test, and What the Regulators Found

Short answer: A private mortgage is a mortgage loan funded by a private lender rather than a bank, credit union, or mortgage finance company: an individual lending their own money, a mortgage investment corporation (MIC) or other mortgage investment entity (MIE) pooling investor money, or a private company lending as its business. It is arranged through a provincially licensed mortgage broker, registered against your home, and built as a short-term bridge, usually with a term measured in months or a year or two, interest-only payments, a higher rate than a traditional lender charges, and a stack of fees on top of the rate. It can solve a real problem: a closing that cannot wait, income a bank will not count, a property a bank will not lend on. It fails in one predictable way. The term ends, the exit the borrower counted on is not there, and the loan renews at private prices for another year. Everything below is about pricing the loan in full and testing the exit before you sign, not after.

This is education only, not mortgage or legal advice. Rates and fees in the worked example are labelled hypotheticals chosen to show how the arithmetic behaves. Your commitment letter and disclosure statement, not this page, set your cost.

What to do now, step by step

1. Write down the problem the private loan solves, in one sentence, with a date. A purchase closing on a set day, a tax debt blocking a refinance, a renovation that makes the home saleable. If the sentence has no date, the loan has no term logic.
2. Get the full disclosure, not the headline rate: interest rate, lender fee, broker fee, administration and legal charges, and the annual percentage rate (APR) the broker is required to disclose.
3. Add the fees to the interest yourself. The worked example below shows why: on a one-year loan, fees are not a rounding item, they are a second interest rate.
4. Check what you actually receive. Fees are often deducted from the advance, so a $200,000 mortgage can put less than $200,000 in your hands while the full $200,000 is owed.
5. Name the exit and test it with numbers: refinance into a traditional mortgage, sell the property, or pay the loan down from a specific source. Each exit gets tested in a section below.
6. Verify the people. In Ontario, the broker and brokerage must be licensed with FSRA, and you can search the licence and the enforcement record before you sign. Every province licenses mortgage brokers through its own regulator.
7. Have a real estate lawyer who does not work for the lender review the commitment before the funding deadline, not on it.
8. Calendar the maturity date and start the exit 90 days before it. A private term that surprises you is a renewal fee you chose by inaction.

Who the lenders are, in the regulators' own categories

CMHC's Fall 2026 Residential Mortgage Industry Report defines the pieces this way. A mortgage investment entity is a non-bank lender type that provides short-term loans with higher interest rates to borrowers who do not qualify with traditional lenders, and MIEs include mortgage investment corporations and other private entities. Alternative lenders, in the same glossary, are unregulated mortgage lenders operating in the uninsured space, typically providing short-term loans at higher rates to borrowers who do not qualify with traditional lenders, with MIEs and other private lenders as the examples. FSRA's Ontario report splits private lenders into individuals, non-individual private lenders (corporations and other entities), and investment firms, and counts banks, credit unions, insurance companies, trust companies and monolines as the traditional side.

Two consequences follow from that structure. First, approval runs on the property more than on the borrower. A private lender's protection is the equity in the home and the ability to sell it, so the appraisal and the loan-to-value ratio do most of the underwriting work that income documents do at a bank. That is the reason a private loan can fund when a bank says no, and it is also the reason the lender is comparatively indifferent to whether the payment fits your budget. The fit is your problem, and the next sections treat it that way. Second, the consumer-protection layer sits mostly with the broker, not the lender. Brokers are provincially licensed and owe you suitability and disclosure duties. An individual lending their own money is generally not licensed as a lender. FSRA's guidance to its own licensees stresses verifying a private lender's source of funds and disclosing every fee, including who receives it, precisely because the lender side of the table is the less regulated side.

How big this market is: Ontario, counted

Ontario is the one province that publishes a full count, in FSRA's Private Residential Mortgage Lending in Ontario Report 2024, built from Teranet land registry data and released August 20, 2025.

Ontario residential mortgages	2023	2024
Private mortgages, number	69,067	65,233
Private mortgages, dollar value	$33.2 billion	$32.0 billion
Private share of all mortgages, by number	16.8%	15.8%
Private share, by dollar value	13.3%	12.5%
Traditional mortgages, number	341,133	348,849
Private lenders, count	not stated here	1,729 (up from 1,262 in 2015)

Read the table in two directions. The market shrank in 2024 as Bank of Canada rate cuts made traditional lending reachable for more borrowers: the count fell 5.6% and the dollar value 3.7% in a year when total mortgages grew slightly. And the market is still large in absolute terms: $32.0 billion of Ontario home loans sit with private lenders, up from $11 billion in 2015, and the Greater Toronto Area runs hotter than the province, at 17.3% of mortgages by number. A private mortgage is not an exotic product. It is roughly one in six Ontario mortgages by count, which is why the pricing and disclosure findings in the next two sections matter beyond the borrowers who hold one today.

The full cost, priced on one example

Take a labelled hypothetical private mortgage: $200,000, a one-year term, interest-only payments, a 9.99% interest rate. The fee stack below is an illustration of the categories FSRA lists for private mortgages (lender, late payment, renewal and foreclosure fees are named in its supervision plan, alongside broker and legal charges in the disclosure rules), at round amounts chosen for arithmetic, not quoted market prices.

Cost item (all labelled hypothetical)	Amount
Interest, $200,000 at 9.99% for 12 months, interest-only	$19,980 ($1,665.00 a month)
Lender fee, 2% of the loan	$4,000
Broker fee, 2% of the loan	$4,000
Appraisal, legal and administration charges combined	$2,500
Total cost of year one	$30,480
Balance still owed at month 12	$200,000

Three readings of that table do the real work.

First, the fees are a second interest rate. $10,500 of fees on $200,000 is 5.25% of the loan, charged over a single year. Add it to the headline and the loan's simple all-in cost for year one is 15.24% of the amount borrowed, before any compounding or net-advance effect. On a five-year bank mortgage the same $10,500 would be spread over five years of use. On a one-year private term it is paid for one. Term length is the multiplier that makes private fees heavy, and it is why a rate quote without the fee stack is not a price.

Second, interest-only means the year buys nothing but time. After $19,980 of interest the balance is the same $200,000 it was on day one. Compare the traditional side, at a labelled hypothetical 4.49% on the same $200,000 with a 25-year amortization: the payment is $1,105.83 a month, first-year interest is about $8,807, and the balance falls to about $195,537. The bank borrower pays less than half the monthly amount and ends the year owing less. Most private borrowers cannot get that bank loan today; that is the premise of the product. The comparison still sets the scale of what the bridge costs while you work on qualifying for the other side of the table.

Third, the advance is often net, not gross. If the $10,500 is deducted at funding, you receive $189,500 and owe $200,000, and the project the loan was meant to fund is short by the amount of the fees on the day it starts. Ask for the net advance figure in writing and budget from it.

The APR problem: what FSRA's file review found

Canadian disclosure rules exist so a borrower can compare that full cost across offers, through the APR. In 2024 and 2025 FSRA ran an examination blitz on exactly that disclosure in private mortgage files, and published the results in its Mortgage Brokering Sector Supervision Plan 2025-26. The findings are the most concrete reason in this guide to recompute any quote you are handed.

FSRA APR examination finding	Share of files
APR calculated correctly	35.5%
Required charges omitted, understating the APR	28.6%
Excluded charges wrongly included, overstating the APR	32.4%
Estimated charges not labelled as estimates	24.4%
Files with terms of 6 months or less (of 82 such files) where the APR exceeded 35%	51% (42 of 82)

Two things follow. The errors run in both directions, so a wrong APR is not automatically a dishonest one; it is a sloppy one, and sloppy disclosure on the borrower's largest debt is a reason to slow the file down. And on short terms the disclosed costs can be very high in APR terms even when the dollar fees look ordinary, because APR spreads one-time fees over a short period. FSRA notes that the federal criminal rate of interest was lowered to 35% APR for most consumer loans effective January 1, 2025, replacing the previous 60% effective annual rate, and used the blitz to remind licensees of that threshold. The files it reviewed were contracted before the change. The practical move for a borrower is unchanged: take the disclosure, add the fee lines to the interest yourself as the table above does, and ask the broker to walk through any line you cannot reproduce.

Why the arrears data argues for a tested exit

CMHC's Fall 2026 industry report tracks arrears of 90 days or more by lender type. The segment that contains MICs and other private entities is carrying visibly more stress than the rest of the system.

Mortgages in arrears 90+ days, share of balances	2025 Q2	2026 Q2
Mortgage investment entities	1.83%	2.57%
Chartered banks	0.23%	0.28%
Credit unions	0.15%	0.14%
Other non-bank lenders	0.20%	0.27%

Inside the MIE segment the stress is concentrated. In the Greater Toronto and Hamilton Area, 11.1% of MIE balances were in arrears in the first quarter of 2026, up from 3.0% in the third quarter of 2023, and more than three times the rate in the rest of Canada. CMHC names three features behind it, and each one is a feature a borrower can check in their own loan before signing. Interest-only lending accounted for 69.7% of GTHA MIE balances in early 2026, against 57.3% in the rest of Canada, so principal does not fall and equity does not build from payments. The share of uninsured GTHA MIE balances with a loan-to-value ratio above 80% rose from 1.6% in early 2024 to 9.2% in early 2026, so a price dip puts more borrowers underwater. And nearly one-third of GTHA MIE balances, 29.0%, were held by borrowers spending more than 60% of income on debt payments, up from 10.4% in early 2024. CMHC also puts the segment in proportion: MIEs were 1.8% of total outstanding mortgage balances nationally in the first quarter of 2026, which limits system-wide risk. None of that proportion helps the individual borrower inside the 11.1%. The arrears pattern is what an untested exit looks like at portfolio scale: interest-only loans, thin equity, heavy debt loads, and a maturity date that arrives before the refinance or sale does.

Our missed mortgage payment guide sets out what happens step by step once payments are missed, and the power of sale guide sets out the Ontario enforcement process a private lender can use, which is faster than foreclosure and is the process most Ontario private mortgages sit under.

The renewal trap, in dollars

A private term that ends without an exit usually does not end. It renews, on the lender's terms, with a renewal fee, and the fee stack resets. Run the worked example forward one more year on the same labelled hypothetical terms, with a 1% renewal fee.

	Year one	Year two, if renewed
Interest at 9.99%, interest-only	$19,980	$19,980
Fees	$10,500 at setup	$2,000 renewal fee (1%)
Cost for the year	$30,480	$21,980
Balance at year end	$200,000	$200,000

Two years of bridge financing on this example cost $52,460, more than a quarter of the amount borrowed, and the borrower owes exactly what they owed at the start. That arithmetic, not the headline rate, is the case for treating a private mortgage as a project with a deadline rather than as housing for debt. If the plan actually needs two years, price two years before signing, including the renewal fee and the rate the lender charges on renewal, which the commitment may leave to the lender's discretion. A loan that only works if everything goes right in year one is not a one-year loan. It is a two-year loan at a price nobody quoted you.

The exit test

FSRA's instruction to its own licensees is the clearest statement of the standard: when arranging a private mortgage, the client must have a realistic exit strategy for the mortgage to be considered suitable, and FSRA's consumer research found 60% of surveyed vulnerable consumers had discussed an exit strategy with their broker, a figure the regulator treats as progress worth pushing higher. A realistic exit is a specific one. There are three, and each has a test.

Exit 1: refinance into a traditional mortgage

The test is qualification, run today, on paper. What specifically disqualifies you now: income documentation, credit score, debt ratios, the property itself, or an outstanding debt such as a tax balance? Which of those can actually change inside the private term, and what evidence will the new lender accept? A credit score does not rebuild because a year passed; it rebuilds because specific accounts were paid and specific reporting cycles ran. Our credit score guide and self-employed mortgage guide work through the two most common versions of this exit. If the disqualifier is the property (an unlisted condo corporation problem, a property type banks will not finance, an unfinished renovation), the refinance exit does not exist until that fact changes, and the loan should be priced as a sale exit instead. The refinance guide sets out the qualification machinery the exit has to pass, including the stress test that a private loan itself does not apply the same way.

Exit 2: sell the property

The test is equity at a realistic price, not the appraised price on a good day. Take a conservative sale price, subtract the selling costs, the first mortgage if the private loan is a second, the private balance, and the payout charges in the private contract, including any discharge and early payout fees. What is left is the answer. If the remainder is negative at a price the local market is actually achieving, the sale exit is a hope, and the loan is priced on hope. Our second mortgage guide prices the position-on-title side of this, because a private second mortgage is paid only after the first is paid in full, and the home equity borrowing guide compares the cheaper equity tools that should be ruled out first.

Exit 3: pay it down or pay it off from a named source

The test is the source: a maturing investment with a date, a business sale with a signed agreement, an estate distribution with a timeline a lawyer confirms. An expected bonus, a hoped-for raise, or a relative's intention are not sources. Where the source is real, match its date to the term with room to spare, because the renewal fee in the table above is the price of a source that lands one month late.

Score the exit you are relying on before you sign. If you cannot state, in writing, which exit, on what evidence, by what date, the suitable product is not a private mortgage yet. It is a smaller loan, a longer runway, or a different plan, and a broker doing the job FSRA describes will say so.

Before private: the cheaper doors to knock on first

A private loan is the last door in a corridor, and some of the earlier doors stay open for borrowers who assume they are closed. Mortgage finance companies and B-side lenders underwrite files banks decline, at rates between bank and private pricing, with full disclosure rules. Credit unions are provincially regulated and some hold files the federal stress test makes hard for banks. A co-borrower or guarantor can repair an income file, and our alternative financing guide covers the equity-sharing arrangements that sit outside mortgage debt entirely. None of these is guaranteed to say yes. Each one that does say yes saves most of the $30,480 in the worked example, which is why the asking order matters: bank or credit union, then B lender, then private, with the written reason for each no kept in the file. That paper trail is also what a traditional lender wants to see at the refinance exit.

Questions to put to the broker and lender, in writing

• Who is the lender, exactly: an individual, a MIC, or a company, and who administers the mortgage once it funds?
• What is the full cost of borrowing for the term in dollars: interest, every fee, and the disclosed APR, and which charges were included in that APR?
• What is the net advance after deductions, and which fees are deducted at funding rather than paid separately?
• Is the payment interest-only or amortizing, and what is the balance on the maturity date?
• What happens at maturity by default: renewal, and if so at what rate and with what renewal fee, or a demand for full repayment?
• What are the charges for a missed payment, a late payment, an early payout, and a discharge, each in dollars or as a stated formula?
• Can the borrower make lump-sum payments or pay the loan in full early, and at what cost in each month of the term?
• What is the exit strategy recorded in the broker's file, and does the broker's suitability note match the exit you described?
• Is the broker being paid by the lender as well as by you, and how much, and are there conflicts of interest to disclose?
• Which regulator licenses the brokerage, and what is the brokerage's licence number?

Pre-signing checklist

• The problem the loan solves is written in one sentence with a date, and the term covers it with room to spare.
• Total first-year cost computed by you, from the disclosure, fees included, and compared against the amount the loan actually advances.
• Net advance confirmed in writing; the project budget rebuilt from the net figure.
• Exit chosen, tested against the relevant section above, and stated in the broker's file the same way you state it.
• Two-year cost priced, including the renewal fee and renewal rate treatment, in case the exit slips by a year.
• Broker and brokerage licence verified with the provincial regulator, and the enforcement record checked.
• Independent lawyer, not the lender's lawyer, has reviewed the commitment, including the default, renewal and payout clauses.
• Maturity date calendared with a 90-day warning, and the exit paperwork scheduled from that warning, not from maturity.
• The cheaper doors were tried first and the refusals kept, for the refinance file.

Frequently asked questions

What is a private mortgage in Canada?

A mortgage loan funded by a private lender instead of a traditional financial institution: an individual, a mortgage investment corporation or other mortgage investment entity, or a private company. CMHC defines mortgage investment entities as non-bank lenders providing short-term loans at higher interest rates to borrowers who do not qualify with traditional lenders. The loan is arranged through a provincially licensed broker and registered against the property, like any other mortgage.

How much does a private mortgage cost?

The rate is only part of it. On a labelled hypothetical $200,000 one-year interest-only loan at 9.99%, interest is $19,980, and an illustrative $10,500 fee stack (lender fee, broker fee, appraisal, legal and administration) brings the first-year total to $30,480, with the full $200,000 still owing at maturity. Fees on a one-year term act as a second interest rate: $10,500 is 5.25% of the loan. Your disclosure statement gives your own figures; add them up the same way.

Are private mortgages regulated in Canada?

The brokering is, province by province. Mortgage brokers and brokerages are licensed by provincial regulators such as FSRA in Ontario, which sets suitability and disclosure duties, requires a realistic exit strategy for a private mortgage to be suitable, and examines files: its APR blitz found only 35.5% of reviewed private mortgage files had the APR calculated correctly. Individual private lenders lending their own money are generally not licensed as lenders, which is why the broker's duties and your own verification carry the weight.

How big is the private mortgage market?

Ontario is the province that publishes a full count. FSRA's 2024 report, built from land registry data, counted 65,233 private residential mortgages worth $32.0 billion in Ontario in 2024, which was 15.8% of mortgages by number and 12.5% by dollar value, down from 16.8% in 2023. Nationally, CMHC reports mortgage investment entities held 1.8% of total outstanding mortgage balances in the first quarter of 2026.

Why do private mortgage borrowers fall behind more often?

CMHC's Fall 2026 report puts arrears of 90 days or more for mortgage investment entities at 2.57% of balances in the second quarter of 2026, against 0.28% for chartered banks, and 11.1% in the Greater Toronto and Hamilton Area in the first quarter of 2026. CMHC points to three features: interest-only loans made up 69.7% of GTHA MIE balances, the share of uninsured balances with loan-to-value above 80% rose to 9.2%, and 29.0% of balances were held by borrowers spending over 60% of income on debt payments. Interest-only payments, thin equity and heavy debt loads leave no slack when the exit is delayed.

How long is a private mortgage term?

Short, by design. Private mortgages are bridge products, commonly written for months or a year or two rather than the five-year terms common at banks. FSRA's disclosure blitz reviewed 82 files with terms of six months or less, on 51% of which the APR exceeded 35%, because one-time fees spread over a short term produce a high annual rate. The short term is the product's central fact: the exit has to fit inside it.

What happens if I cannot pay off a private mortgage when the term ends?

Three outcomes are common. The lender renews the loan, usually with a renewal fee and possibly a new rate, which on the worked example in this guide adds a second-year cost of $21,980 on $200,000. The lender declines to renew and demands repayment, which forces a sale or a new loan under time pressure. Or the borrower falls into arrears, and the lender enforces against the property, in Ontario usually through power of sale. Which outcome you face is set by the maturity and default clauses, so read them before signing, not at maturity.

Is a private mortgage a good way to consolidate debt?

Only if the exit test passes and the spending side is closed. Consolidating card and loan balances into a private mortgage lowers the rate on that debt and secures it against the home, which converts unsecured debt a lender cannot take your house over into debt it can. If the cards refill during the term, the borrower reaches maturity with the mortgage and the card balances. The consolidation version of the exit test is a refinance qualification that improves as the unsecured balances stay at zero, verified on paper, not a plan to try harder.

Sources

Market structure, arrears and market-size figures in this guide were taken from the sources below, read in October 2026. Your mortgage contract, commitment letter and disclosure statement govern your file.

• Financial Services Regulatory Authority of Ontario (FSRA), Mortgage Brokering Sector Supervision Plan 2025-26: the APR examination blitz (35.5% of files correct, 28.6% with required charges omitted, 32.4% with excluded charges included, 24.4% with unlabelled estimates, 51% of files with terms of six months or less showing an APR above 35%), the January 1, 2025 criminal rate change to 35% APR for most consumer loans, the fee categories in private mortgages, and the summary of the 2024 private lending report: https://www.fsrao.ca/industry/mortgage-brokering/regulatory-framework/supervision/mortgage-brokering-sector-supervision-plan-2025-26
• Financial Services Regulatory Authority of Ontario (FSRA), Private Residential Mortgage Lending in Ontario Report 2024, released August 20, 2025 (figures as reported from Teranet LendView land registry data): 65,233 private mortgages and $32.0 billion in 2024, 15.8% of mortgages by number and 12.5% by dollar value, the GTA at 17.3% by number, 1,729 private lenders, and growth from $11 billion in 2015.
• Financial Services Regulatory Authority of Ontario (FSRA), Mortgage Brokering News You Need, Volume 10: a private mortgage client must have a realistic exit strategy for the mortgage to be considered suitable, verification of a private lender's source of funds, and full disclosure of every fee and who receives it: https://www.fsrao.ca/announcements/mortgage-brokering-news-you-need-volume-10
• Canada Mortgage and Housing Corporation (CMHC), Residential Mortgage Industry Report, Fall 2026 edition: the definitions of mortgage investment entities and alternative lenders, MIE arrears of 2.57% in the second quarter of 2026 against 0.28% for chartered banks, GTHA MIE arrears of 11.1% in the first quarter of 2026, interest-only loans at 69.7% of GTHA MIE balances, uninsured loan-to-value above 80% at 9.2%, total debt service above 60% at 29.0% of balances, and MIEs at 1.8% of total outstanding balances: https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-research/research-reports/housing-finance/residential-mortgage-industry-report

Worked examples were computed for this guide from the stated balances, rates and fee amounts. They are illustrations of how the arithmetic behaves, not rate quotes, fee quotes, or a recommendation for any household.