Private Mortgage Financing: When Banks Say No

Not every mortgage application fits within a bank’s strict lending rules. Whether due to credit challenges, complex income, or unique property types, many Canadians find themselves declined by traditional lenders. In these situations, private mortgage financing can provide a viable alternative—if used strategically.

What Is a Private Mortgage?

A private mortgage is a loan funded by an individual or private lending company rather than a bank or credit union. These lenders focus more on property value and equity than on income documentation or credit history.

Private mortgages are often short-term solutions, not long-term financing.

Common Reasons Banks Say No

Banks may decline applications due to:

• Low or bruised credit scores

• Self-employed or variable income

• High debt ratios

• Property issues (rural, unique, or commercial use)

• Recent life events (divorce, bankruptcy, job change)

Private lenders are more flexible in these situations.

How Private Mortgage Financing Works

Private mortgages typically feature:

• Higher interest rates

• Shorter terms (6–24 months)

• Interest-only payments in many cases

• Fees at setup and renewal

The focus is on equity and exit strategy rather than long-term affordability.

When a Private Mortgage Makes Sense

Private financing may be appropriate if you:

• Need quick approval

• Are repairing credit or income documentation

• Plan to refinance with a bank later

• Need bridge financing during a transition

Clear planning is essential.

Risks and Costs to Consider

Borrowers should understand:

• Higher borrowing costs

• Lender fees and legal costs

• Renewal risks if exit plans fail

Private mortgages should be viewed as temporary tools.

How to Use Private Mortgages Strategically

To use private financing wisely:

• Have a clear exit strategy

• Borrow conservatively

• Work with licensed professionals

• Avoid long-term dependence on private loans

Private mortgages work best as bridges, not destinations.

Alternatives to Private Financing

Before choosing private lending, explore:

• Alternative (B) lenders

• Co-signers

• Larger down payments

• Restructuring debt

These options may reduce costs.

Final Thoughts

Private mortgage financing can be a lifeline when banks say no—but it’s not for everyone. When used strategically and temporarily, private mortgages can help Canadians overcome short-term challenges and move back into traditional financing.