Private Mortgage Lenders in 2027: Rates, Risks, and When to Use One

A private mortgage lender is an individual or company that lends money secured by real estate outside of regulated banking institutions. Private lenders include: mortgage investment corporations (MICs), syndicates of individual investors, wealthy individuals, and some alternative finance companies. Private mortgages are not subject to bank stress tests (in Canada) or conventional underwriting guidelines (in the US). Key characteristics: (1) Asset-based lending — approval focused on property value and equity, not income qualification; (2) Short terms — typically 1–3 years; (3) Higher rates — typically 8%–15% in Canada, 10%–18% in the US in 2027; (4) Higher fees — 1%–4% lender fee, 1%–2% broker fee; (5) Interest-only common — no amortization required. See FSRA Ontario — Private mortgages.

Private mortgages are typically a bridge solution — not a long-term mortgage. Appropriate use cases: (1) Credit repair bridge: borrowers with recent bankruptcies, consumer proposals, or collections who need 1–2 years to rebuild credit before qualifying at a B-lender or bank; (2) Quick closing: purchase situations requiring 1–2 week closings where conventional approval can't be obtained in time; (3) Property not mortgageable at A-lenders: unique properties, rural land, distressed condition; (4) Equity extraction: homeowners with high equity but income that doesn't pass stress test; (5) Construction funding: bridge financing during renovation. The key: always have an exit strategy — a clear plan to refinance into a conventional or B-lender mortgage before the private term expires. See bridge loan glossary.

Private mortgage pricing in 2027: Canada: (1) Interest rate: 8%–14% for first mortgages, 12%–18% for second mortgages; (2) Lender fee: 1%–3% of loan amount; (3) Broker fee: 1%–2% of loan amount; (4) Appraisal: $300–$600; (5) Legal fees: $1,000–$2,000. US (hard money): (1) Rate: 10%–18%; (2) Points: 2–5 points (2%–5% of loan amount); (3) Origination and processing: $1,500–$3,000. Total cost of a 1-year, $300,000 private mortgage in Canada at 10% + 2% lender fee + 1% broker fee = approximately $30,000 in interest + $9,000 in fees = $39,000. This is extremely expensive and justifiable only as a temporary bridge. Compare via the mortgage calculator against B-lender or conventional options. See FSRA — Understanding private mortgage costs.

Private mortgages in Canada are regulated at the provincial level through mortgage broker licensing laws. Key regulators: (1) Ontario: Financial Services Regulatory Authority of Ontario (FSRA) — brokers and agents must be licensed; private mortgage-specific disclosure requirements under MBLAA; (2) BC: BC Financial Services Authority (BCFSA) — Mortgage Brokers Act licensing; (3) Alberta: Real Estate Council of Alberta (RECA); (4) Other provinces: similar licensing bodies. The private lender itself may not need to be licensed if they are an individual lender — only the mortgage broker/agent arranging the loan must be licensed. Since 2023, Ontario's FSRA has implemented enhanced suitability and disclosure requirements for private mortgages, requiring borrowers to receive a detailed cost-of-borrowing disclosure before signing. See FSRA — Private mortgage regulatory requirements.

B-lenders (also called alternative or near-prime lenders) include trust companies, monoline lenders, and some credit unions that lend to borrowers who don't qualify at major banks but have reasonable credit and income. Examples: Home Trust, Equitable Bank, MCAP, First National (B-side). B-lenders are federally or provincially regulated, must comply with capital requirements, and offer rates typically 0.5%–2.5% above major bank rates. Private lenders are largely unregulated as lenders (though broker activity is regulated), lend based on equity rather than income qualification, and charge 3–8% above B-lender rates. The lending hierarchy: A-lenders (big banks) → B-lenders (trust/mono) → private lenders. Borrowers should always exhaust B-lender options before going private. In Canada, the stress test does not apply at B-lenders (credit unions may be exempt from OSFI B-20 in some provinces). See Canada mortgage stress test update 2027.