Private Mortgages in Alberta: How They Work and Get Registered

A private mortgage is a loan secured on land that comes from someone other than a bank, such as an individual or investor. Borrowers often turn to them when a conventional lender is not an option, and lenders use them to earn interest secured against property.

The registration rules are the same as for any mortgage, but the interest limits and enforcement rules matter more. This article walks through documents, registration, interest and risks.

This article covers the law of Alberta.

What makes a mortgage registered

A mortgage is a charge on land created for securing a debt or loan. To register it, the mortgagor executes it in the prescribed form, or to the like effect. A registered mortgage is security only and does not transfer the land, so the borrower stays the registered owner.

A lender may also use a standard form mortgage, with the standard terms filed with the Registrar. The mortgage then states that it consists of those terms, sets out the principal sum, and is dated and executed by the mortgagor.

Registering on title and what it costs

Documents are submitted to a Land Titles office on the prescribed form, by mail or drop-off, with fees due at submission. In-person service was paused in Edmonton and Calgary, so confirm options by phone. Accepted documents are registered in the ALTA database and given a registration number.

The mortgage levy is $50 plus $5 for each $5000 or portion thereof of the principal secured. The increase applies to submissions received on or after October 20, 2024. The levy grows with the size of the loan, because the $5 part is charged on each $5000 or portion of the principal. If the Registrar does not accept the mortgage, the levy is returned.

The levy is reduced where a new mortgage by the same mortgagee supplements, is collateral to, substitutes for or partially replaces an existing one against a condominium unit, and an amending agreement that increases principal is levied only on the increase.

Priority, second mortgages and caveats

Priority is decided by the serial number the Registrar assigns, not the date of signing. A second mortgage is registered the same way as a first and carries its own levy, ranking behind the first because the first has the earlier serial number.

• A lender with an unregistered mortgage interest can protect it with a caveat, and a levy is payable on that too.
• A registered mortgage keeps priority for advances it secures, including later ones.
• A first mortgagee can agree to rank behind a later lender by filing a postponement.

Interest rules and limits

For certain blended-payment mortgages, no interest is recoverable unless the mortgage states the principal and the yearly or half-yearly rate, and a private mortgage's interest terms must meet these rules. No penalty or higher rate may be taken on arrears if it raises the charge above the rate on principal not in arrears.

A criminal rate is an annual percentage rate above 35 per cent on the credit advanced, and charging it is an offence punishable by up to five years' imprisonment on indictment. Interest includes all charges and expenses for advancing credit, so lender and broker fees count.

On a mortgage not payable until more than five years after its date, the borrower may prepay after paying the amount due plus three months' further interest, though some corporate mortgages are excluded.

Risks if things go wrong

In a mortgage enforcement action, the lender's right is restricted to the mortgaged land, and a borrower cannot waive that protection. The default redemption period on a foreclosure order is six months for non-farm land and one year for farm land.

There are exceptions. These protections do not apply to mortgages given by corporations, or to a high-ratio mortgage as defined in the regulations. Whether they apply to you depends on the facts.

What to do next

• Get the loan terms in writing, including principal, rate and every fee.
• Have a lawyer check that interest terms meet the Interest Act and stay below the criminal rate.
• Confirm who else is registered on title, since order of registration decides ranking.
• Decide who submits the documents and confirm current Land Titles fees.
• Plan the discharge for when the loan is repaid.

Frequently asked questions