5 Things to Know Before Applying for a Private Mortgage

Private mortgages occupy a specific place in the Canadian lending market: they're for situations where traditional lenders have said no, or where speed and flexibility matter more than rate. But "private mortgage" means different things to different people — and misunderstanding how they work leads to bad decisions.

Here are five things you need to know before you apply.

1. Private Mortgages Are Equity-Based, Not Credit-Based

This is the fundamental difference. Banks underwrite primarily on your credit score and income. Private lenders underwrite primarily on the property.

If your home in Edmonton has $200,000 in equity and you want to borrow $100,000, a private lender sees a well-secured loan at 50% LTV. Your credit score of 520 matters far less than it would at a bank, because the lender's risk is protected by the collateral.

This is why private mortgages are accessible to Canadians who have been through a financial hardship — divorce, medical debt, business failure, tax arrears — that damaged their credit but didn't eliminate their equity.

2. Rates Are Higher — and That's Okay If You Use Them Correctly

Private mortgage rates in Canada typically range from 8% to 15%, depending on LTV, property type, location, and lender. That's significantly higher than A-lender rates. Understanding why that rate is acceptable — or not — is critical.

A private mortgage makes sense when:

• The alternative is worse: carrying 24% credit card debt, losing a property to a power of sale, missing a tax deadline with penalties
• The term is short: 1-2 years of higher payments to stabilize your situation, then refinance to a lower rate
• The equity gain outweighs the cost: using a private mortgage to buy a property that appreciates makes the higher rate cost look small against the equity built

A private mortgage as a permanent solution is rarely the right answer. As a bridge to a better situation, it's often the only answer.

3. Lender Fees and Broker Fees Are Part of the Cost

Private mortgages come with fees that bank mortgages often don't have. You'll typically encounter:

• Lender fee — Usually 1-3% of the mortgage amount, deducted from the advance. On a $100,000 mortgage, that's $1,000-$3,000.
• Broker fee — The broker arranging the loan charges for their work, typically 1-2%. Sometimes included in the lender fee, sometimes separate.
• Legal fees — Both you and the lender need legal representation for the mortgage registration. Budget $1,500-$2,500 for both sides.
• Appraisal — Private lenders almost always require a current appraisal. $300-$600 for a residential property.

These aren't hidden — a reputable broker discloses them upfront. But factor them into your total cost calculation. On a $100,000 private mortgage, you might net $92,000-$95,000 after fees.

4. Terms Are Short — By Design

Most private mortgages in Canada are 6-24 month terms. This isn't a disadvantage — it's structural. Private mortgages are designed to solve a specific problem for a defined period, after which the borrower refinances into better terms.

When you take a private mortgage, you should have a clear exit plan:

• "I'm using 12 months to rebuild my credit from 540 to 650, then qualifying for an A-lender"
• "I'm selling the property in 18 months and paying off the mortgage from proceeds"
• "I'm clearing my CRA tax debt in year one, then my income picture looks clean enough for a bank"

If you don't have an exit strategy, ask your broker to help you build one. A short-term solution without a plan becomes an expensive long-term problem.

5. Speed and Certainty Are the Real Value Propositions

Banks take 30-45 days to close. Sometimes longer. Private lenders can often close in 5-10 business days when the deal is clean.

For time-sensitive situations — a power of sale notice, a business opportunity, an estate settlement — that speed difference is worth real money. And unlike a bank that might decline after 6 weeks of underwriting, a private lender gives you a clear answer quickly.

Certainty matters too. Once a private lender commits, the deal closes. There are no last-minute surprises from a credit committee that's reviewing your file remotely.

Working with a Specialist Matters

Not all brokers have deep relationships in the private lending market. A broker who primarily works with A-lenders and occasionally does private deals is not the same as a firm that specializes in non-prime. The network matters — different lenders have different appetites for different situations, and a specialist knows which lender fits which file.

Titus Financial focuses exclusively on the non-prime and private lending space across Edmonton, Calgary, and Vancouver. That focus means better outcomes for borrowers who need a solution that banks won't provide.