Bank said no? A private mortgage is a bridge, not a destination

Being turned down by a bank is stressful, especially if you need to buy, refinance or pay something off by a set date. A private mortgage can help in the right situation. But think of it as a bridge, not a destination: a short-term loan that gets you from where you are now to a regular, lower-cost mortgage, or to the sale of the property.

If the Bank of Canada’s October 28, 2026 rate increase or the stress test has made qualifying harder, here’s what to know before you consider private financing.

What a private mortgage is

A private mortgage is a loan from a lender that isn’t a bank or credit union. Private lenders can be individuals, groups of investors, private companies or mortgage investment corporations (MICs). Like any mortgage, it is secured by your home.

The main difference is how you qualify. A bank looks first at your income, debts and credit. Private lenders often lend mainly on the value of the property and your equity in it, rather than your income. That flexibility is why private mortgages cost more.

Private lenders are not the only option outside the big banks. Alternative lenders (sometimes called B lenders) still check income, debts and credit, but with more flexible rules, and usually cost less than private lenders. It’s worth checking whether one of those fits first.

Who it can suit

A private mortgage can make sense for people who have good equity in their home but don’t fit a regular lender’s rules right now, for example:

• Bruised credit, such as past missed payments or a past bankruptcy, that you’re working to rebuild.
• Income that’s hard to prove on paper, which is common for self-employed borrowers. See self-employed mortgages for how regular lenders read business income.
• A tight timeline, such as a purchase closing date or a debt you need to clear quickly.

In each case, the private mortgage should solve a short-term problem while you work on the thing that stopped the regular lender from saying yes.

The trade-offs

• Higher rates plus fees. Expect a higher interest rate than a regular mortgage, plus lender and broker fees. Some private lenders also charge fees for administration, late payments, discharge or enforcement. Rates and fees vary widely between lenders, so compare the total cost, not just the rate.
• Short terms. Terms are often one year, sometimes two. At the end, you need to pay the loan off, refinance or renew, and renewal may come with another fee.
• Often interest-only. Many private mortgages are interest-only, so your payments don’t reduce what you owe. Some even have no regular payments, with interest and fees added and due at the end. Either way, your balance doesn’t shrink, and your equity can shrink if interest is added on.
• Read the renewal terms. Some commitments renew automatically at a higher rate with a renewal fee if the mortgage is still outstanding at maturity. If interest is prepaid for the first year, budget for the jump when regular payments start.

Lenders on a September 2026 industry panel made the same point: it’s not just the cost on the way in, it’s the cost on the way out.

Your exit plan matters most

Before you sign, you should know how you’ll get out of the private mortgage. Ontario’s mortgage regulator, FSRA, says borrowers need a realistic exit strategy and a back-up plan in case it doesn’t work out. The two common exits are:

• Refinance back to a regular lender. Know exactly what needs to change to qualify, such as rebuilding your credit score, showing two years of business income or paying down other debts, and whether that can realistically happen within the term.
• Sell the property. Make sure there is enough equity today to cover the mortgage, the interest and fees, and the costs of selling. FSRA warns that a plan that depends on prices rising isn’t a reasonable exit strategy.

Plan for more time than you think. Private lenders on that September 2026 panel said exits are taking longer, with many borrowers needing two or three years to move back to a regular lender, and stressed matching the length of the term to the exit plan. If the term ends before you’re ready, you may face another round of fees at a higher cost, which eats into your equity.

Questions to ask before you sign

• Why a private mortgage, and not a regular or alternative lender? What would I need to change to qualify for those?
• What is the total cost: interest rate, lender fee, broker fee, legal costs and any fees during the term or at payout?
• How long is the term, are payments interest-only, and can I pay it off early without a penalty?
• What happens at the end of the term if I’m not ready to exit? Will the lender renew, and at what cost?
• What happens if I’m late on a payment or miss one?
• How much time do I have to review the documents with my lawyer?

Don’t rush. Have your lawyer review the commitment and the mortgage documents before you sign, and make sure you understand every fee.

Private mortgages in Alberta: licensing and disclosure

In Alberta, mortgage brokerages and their associates are licensed by the Real Estate Council of Alberta (RECA). Private lenders themselves are generally not licensed, but they are still subject to the general provisions of Alberta’s Consumer Protection Act. Before you go ahead, you can check that the person you’re dealing with is licensed on RECA ProCheck.

Private files may carry a broker fee. Any fee, and how the brokerage is paid, must be disclosed to you in writing before you commit. See how mortgage brokers are paid in Alberta.

Talk it through first

If your bank has said no, a conversation can help you see whether a regular, alternative or private lender fits, and what a realistic path back to lower-cost financing looks like. Already own your home and want to use your equity? See refinancing in Alberta and what breaking your current mortgage may cost.

You can also call or text 403-438-0761. A pre-approval is not a guarantee of final mortgage approval. Rates, fees and terms vary by lender, and every mortgage is subject to approval.