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| Insured ? | 80% LTV ? The rates in this column apply to mortgage amounts between 65.01% and 80% of the property value. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates. | 65% LTV ? The rates in this column apply to mortgage amounts that are 65% of the property value or less. The home must be owner-occupied and have an amortization of 25 years or less. You must have purchased it for less than $1 million. These rates are not available on refinances. Refinances require "Uninsured" rates. | Uninsured ? | Bank Rate ? | ||
|---|---|---|---|---|---|---|
Insured 5.84% | 80% LTV 4.79% | 65% LTV 4.79% | Uninsured 6.83% | 6.69% | ||
Insured 5.09% | 80% LTV 5.09% | 65% LTV 5.09% | Uninsured 5.84% | 5.99% | ||
Insured 4.29% | 80% LTV 4.49% | 65% LTV 4.49% | Uninsured 4.69% | 4.99% | ||
Insured 4.44% | 80% LTV 4.59% | 65% LTV 4.59% | Uninsured 4.79% | 4.89% | ||
Insured 4.19% | 80% LTV 4.39% | 65% LTV 4.19% | Uninsured 4.19% | 4.59% | ||
Insured 4.59% | 80% LTV 5.09% | 65% LTV 5.09% | Uninsured 5.9% | 5.56% | ||
Insured 5.19% | 80% LTV 5.44% | 65% LTV 5.44% | Uninsured 5.8% | 7.19% | ||
Insured 5.55% | 80% LTV 5.65% | 65% LTV 5.55% | Uninsured 5.55% | 7.85% | ||
Insured 5.15% | 80% LTV 5.3% | 65% LTV 5.2% | Uninsured 5.2% | 5.55% | ||
Insured N/A | 80% LTV N/A | 65% LTV N/A | Uninsured N/A | N/A | ||
Insured 5.25% | 80% LTV 5.25% | 65% LTV 5.25% | Uninsured 5.25% | N/A |
A private mortgage is a loan financed through a private source of funds, rather than through a traditional mortgage lender, for the purpose of buying a house.
Using a private lender isnât advisable as a long-term solution, but is a good option for potential borrowers having trouble qualifying for a traditional mortgage with A or B lenders. For example, if you want to purchase an unconventional property, you need to rebuild your credit, or you donât have time to wait out a long approval process.
Searching for a private mortgage in Canada? LowestRates.ca can connect you with a lender. Still need more information about how private mortgage lending works? Keep scrolling to learn what private loans are and what you need to watch out for.
A private lender is an individual or a non-registered institution willing to lend money and put their name on the deed for a mortgage. Brokers of private mortgages can be friends or family lending their own money to investment corporations that pool capital from investors.
Private lenders are considered non-bank mortgage lenders in Canada.
Because private lenders donât take deposits thereâs no oversight or regulation on how they lend out that money. The fees, rate, and terms are 100% set by the lender.
For people with bad credit, private mortgage lenders are often billed as a solution: their typical clientele are homebuyers who canât qualify for a mortgage loan at a bank.
Often referred to as the wild west mortgage market, private mortgages should be used as a short-term solution when longer-term financing is not available or accessible.
How is getting a mortgage from a private lender different from going through a bank?
âA-lendersâ refer to Canadaâs major banks (BMO, CIBC, National Bank of Canada, Scotiabank, RBC, and TD) and credit unions that cater to customers with good credit scores and a reliable income â these are considered âAâ level clientele. The majority of people looking for mortgages have traditionally gone to these lenders. Many credit unions also cater to a primarily âAâ clientele, but they are not federally regulated.
âB-lendersâ are institutions that offer a lower barrier of entry to qualify for their products, Equitable Bank and Home Capital are two examples. They cater to "B" clientele, homeowners who may not qualify for a mortgage or credit card at one of Canada's six major banks.
Private lenders take on clients with riskier profiles for shorter terms at higher interest rates. They arenât subject to the same regulations that banks and credit unions are, making them favourable for clientele who canât obtain a mortgage from a traditional lender.
Yes. Private lenders arenât subject to the stricter rules governing banks and credit unions and how those institutions can lend money, so private lenders are able to make riskier loans. As a result, they also charge more interest rates than the banks.
Additional fees are involved with private mortgages, including lender, legal and broker fees.
Private lenders typically charge 1% of the mortgage amount for the fee when you close, so that means your closing costs increase.
Shop around and talk to multiple private lenders before making any commitments to make sure youâre getting the best available rates.
People who havenât been able to secure a mortgage through a traditional lender â generally because they havenât been able to pass the stress test â go the private route.
Clientele can include:
Because private lenders take on riskier clientele, they charge much higher interest rates than the banks, so the financing theyâre able to provide tends to cost more than if you went with a traditional lender.
A private mortgage lender is also more sensitive to market downturns, which means they have the tendency to foreclose on homes quickly (quicker than banks would) if the mortgage holder falls behind on their payments.
Because private mortgage lenders are not subject to the same regulations as banks and credit unions, they can charge unconventional fees â some of which may even be illegal. For example, in Ontario, itâs illegal for a private lender to charge a fee upfront on a mortgage valued at less than $400,000.
Lastly, amortization schedules are longer on a private mortgage. Traditional amortization in Canada is set at 25 years, but private mortgages can stretch out to 40 years. That means youâll pay much more interest over the lifetime of your mortgage.
Mortgage-seekers should use private lenders as a short-term solution to get back to borrowing from a traditional lender.
Private mortgage lenders in Canada should provide a plan to wean you off the private loan also known as an exit strategy.
Examples of exit strategies include:
When securing a private mortgage, itâs especially important to ask lots of questions. Private mortgages operate differently than bank loans so itâs important to understand what youâre getting into before signing a contract. If you donât understand the terms and conditions then you should consult a lawyer to explain so youâre aware of any pitfalls.
When considering signing a private mortgage agreement, some questions to ask include:
Be sure to read the fine print, ask questions, and get a second opinion if youâre unsure.
Every lender is different, however, the criteria for approval arenât as prohibitive as it is with A lenders, seeing as there is limited regulation around the private mortgage industry.
Traditional lenders require a lot of documentation to prove you can afford to pay back a loan. For example, to qualify for a mortgage loan at a bank, you will need to pass a stress test that verifies you can afford payments at a qualifying interest rate which is typically higher than the actual rate in your mortgage contract.
Private lenders are not required to do so and many choose to skip this mortgage stress test and set their own terms for qualification.
Enlisting professional help through a lawyer will ensure you make an informed decision and understand the risks when using a private mortgage lender.
While you canât apply for a private mortgage on LowestRates.ca, we can redirect you to one of our mortgage broker partners that can answer your questions and help arrange one. Click the âContact Usâ button at the top of the page and weâll refer you to a private mortgage lender in Canada.
Jessica Vomiero
About the Author
Jessica is the former Associate Editor for LowestRates.ca. Before joining the team, Jessica worked as a National Online Journalist with Globalnews.ca and previously spearheaded the launch of the Business Section at one of Canada's largest technology websites, MobileSyrup.
HomebuyingFor a majority of Canadians, buying a home will be the biggest purchase they ever make. And unlike many purchases you ma...
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