If you've been turned down by a bank, or you need money in days instead of weeks, this is the financing world you're about to enter. No jargon, no sales pitch — just exactly how it works.
Who Uses Private Lending?
Private lending isn't a last resort for people who've made bad decisions — it's a practical tool for specific, common situations:
- Self-employed borrowers whose income is hard to verify through traditional underwriting
- People with bruised credit from a past bankruptcy, consumer proposal, or rough financial stretch
- Homeowners facing foreclosure who need fast funds to bring a mortgage current
- Investors and business owners who need to close on a property in days, not weeks
- People with unconventional properties that banks won't finance — rural land, unique construction, properties needing repair
The common thread isn't bad credit or bad decisions. It's timing, documentation, or property type that doesn't fit inside a bank's box.
How Does Private Lending Actually Work?
A private lender — typically an individual investor or a private lending company — provides a mortgage secured against real estate, just like a bank does. The key differences are in how the file is assessed and what it costs.
The approval is based primarily on equity, not income. Where a bank wants to see two years of tax returns and a specific debt-to-income ratio, a private lender is mainly asking one question: if this loan isn't repaid, can the property be sold to recover the money? That's why private lending is measured in loan-to-value (LTV) — how much you're borrowing compared to what the property is worth.
Typical Structure
Term: Usually 12 months, sometimes renewable
Payment type: Interest-only, meaning your monthly payment covers interest with no principal reduction
LTV: Generally 65–80%, depending on property type and location
Interest rate: Typically 10–12% in Atlantic Canada, often lower in Ontario where the private lending market is more competitive
Fees: A lender arrangement fee (commonly 5–8%) and a broker fee (commonly 2–4%), both usually deducted from the loan proceeds at closing
What Does Private Lending Actually Cost?
This is the part people are most nervous to ask about — so here's a straightforward example.
Say you need $100,000 in hand — cash you can actually use — with a 12% interest rate, an 8% lender fee, and a 4% broker fee. Because fees come off the top, you don't just borrow $100,000. Here's what it actually takes to walk away with that amount.
| Amount you need in hand | $100,000 |
| Lender arrangement fee (8%) | $8,000 |
| Broker fee (4%) | $4,000 |
| Total amount you actually borrow | $112,000 |
| Monthly interest-only payment (12%) | $1,120 |
| Amount repaid at end of 12-month term | $112,000 |
In plain terms: if you need $100,000 in hand, you're actually borrowing — and eventually repaying — $112,000, plus $1,120 a month in interest along the way. It isn't cheap money. But for someone who needs $100,000 in five days to stop a foreclosure, the cost of not having access to it is almost always higher.
Worth knowing: this example reflects one common private lending structure, not a fixed industry rate. Fees vary meaningfully between lenders — some charge less, some structure their fee differently, and some don't charge a lender fee at all. Part of what a broker does is shop your file across multiple private lenders to find the best terms for your specific situation, rather than taking the first offer.
Is Private Lending Safe?
Yes — when it's done properly. Private lending and mortgage brokering are regulated provincially, not left to the honor system. In Ontario, that oversight comes from the Financial Services Regulatory Authority of Ontario (FSRA) under the Mortgage Brokerages, Lenders and Administrators Act. In Nova Scotia, it falls under the Registrar of Mortgage Brokers and Lenders at the province's Financial and Consumer Services Commission. These are the same licensing bodies behind my own broker and brokerage registrations, listed in the footer below. Legitimate private mortgages go through the same legal process as a bank mortgage: a lawyer registers the charge against the property, title insurance is typically required, and the terms are disclosed in writing before you sign anything.
The questions worth asking before you commit to any private mortgage:
- Is the lender licensed?
- Are all fees disclosed clearly in writing before closing?
- Is there a real exit strategy — a plan to refinance or pay it off — once the term is up?
A good private lending file isn't meant to be permanent. It's a bridge — a 12-month solution that buys time to fix the underlying issue, whether that's rebuilding credit, selling a property, or qualifying for conventional financing again.
The Bottom Line
Private lending exists because banks can't say yes to every situation, even when the underlying real estate makes the loan perfectly reasonable. It costs more than a bank mortgage. It's faster, more flexible, and built around the property rather than the paperwork.
If a bank has said no, that doesn't mean the door is closed — it means you're looking at a different door.
Wondering if private lending fits your situation?
Run the numbers yourself first — then let's talk about what makes sense for you.
Talk to Pat →