Buying property in Ontario isn’t as simple as it used to be. Traditional banks turn down more applications now, mainly from people with unique income, low credit, or urgent timelines.

As a result, more buyers and homeowners are turning to a private mortgage. This type of non-traditional financing opens a door when others stay shut. It is flexible and fast.

However, how does a private mortgage work, who uses it, and is it the right option for you?

Why Private Mortgages Are on the Rise in Ontario

Ontario homebuyers face tighter rules. The federal mortgage stress test now forces borrowers to qualify at a rate higher than their contract rate.

Rejection rates have increased among first-time buyers, the self-employed, and newcomers to Canada.

Some struggle to prove their income the way big banks want, while others have bruised credit or carry more debt than banks allow. “A lenders”, like traditional banks or credit unions, usually say no in these cases.

This gap has pushed more people toward B lenders in Canada, like private options. Between 2019 and 2021, private mortgage volume in Canada jumped by 72%, up from $13 billion to over $22 billion.

In quarter one (Q1) of 2021, Ontario accounted for 48.7% of all private mortgage activity across the country.

Private options are a form of non-traditional financing. They offer faster approvals, flexible terms, and fewer income restrictions. For many, it is not just an alternative, but the only way forward.

What Makes Private Mortgages Different and Valuable

A private mortgage is not tied to the same strict rules as a bank loan. It comes from individual investors or private lending firms. 

Approval is much faster, usually within days. These mortgages mostly run for short terms, like 6 months to 3 years. Additionally, many offer interest-only payments to lower monthly costs.

This kind of non-traditional financing helps people in transition. Mortgage brokers are always in the best position to connect clients with B lenders in Canada, like private loans, and shape flexible solutions that banks won’t offer.

Who is private mortgage financing meant for?

A private mortgage helps people with real-life financial gaps. For example:

  • A self-employed buyer with strong income, but no T4.
  • A newcomer building credit.
  • A homeowner needing bridge financing between sales.
  • An investor jumping on a fast deal.
  • Someone with past credit issues who needs a fresh start.

These borrowers don’t always meet strict bank rules. However, they still need funding, hence the need for non-traditional financing.

The Costs and Considerations You Need to Know

A private mortgage costs more than a traditional loan. Interest rates are higher, within 8% to 15% depending on the lender and risk. There are also extra costs like setup fees, legal expenses, and lender fees. In many cases, though, it is worth it for speed, flexibility, or access.

Still, it is not a forever solution. Many borrowers use it mostly for short-term purposes, then refinance later through another route with better terms. Thus, it is important to plan your exit before signing.

Northwood Mortgage: The Best Negotiators in Your Corner

Getting declined by a bank doesn’t mean your options are gone; it just means you need the right partner. At Northwood Mortgage, we don’t lend—we broker. That means we search across a wide pool of options, including private mortgage lenders. Our local brokers have decades of experience in the Ontario housing market.

They compare rates, structure deals, and negotiate terms that match your needs. Once this is achieved, the next phase, which entails fast closing and flexible repayment, is completed.

Are you ready to explore private mortgage lending opportunities? If so, call Northwood Mortgage today at 888-495-4825 or reach out online, and we will handle the rest.