What makes a mortgage private
A private mortgage is funded by an individual, a group of individuals in a syndicate, or a mortgage investment company, rather than a bank or credit union. Private lenders generally focus on the property's value rather than the borrower's income and credit history, which is why private mortgages are often used where a bank has declined an application or a closing needs to happen quickly.
The cost is usually higher, the term shorter, often a year or less, and the arrangement typically renews or is refinanced elsewhere rather than running for a long amortization.
How brokers arranging them are regulated
A broker or agent arranging a private mortgage in Ontario is licensed under the Mortgage Brokerages, Lenders and Administrators Act, 2006 and must give the borrower a written disclosure statement setting out the cost of borrowing, the broker's own remuneration, and any conflict of interest before the mortgage is signed. This applies whether the money ultimately comes from one lender or several investors pooled together.
Ask to see this disclosure before committing to anything, and compare it against what is actually in the mortgage document.
What second position means in practice
A second mortgage registers behind an existing first mortgage on the same property. If the property is later sold under a power of sale, the first mortgage is paid out before the second, which means a second mortgage is riskier for the lender and generally carries a higher cost as a result. It does not change your obligations under the first mortgage, which continue independently.
Both mortgages must be kept current; falling behind on either can put the property at risk, regardless of which is technically in default.
What a lawyer checks before you sign
Before a private or second mortgage closes, we confirm what is already registered against the property and its priority, review the disclosure statement against the mortgage document, and make sure the term, the renewal or exit terms, and any charge for paying out early are clearly set out rather than left to be worked out later. We do not arrange the financing or assess whether the terms are good value; that is between you and the lender.
Independent legal advice, separate from any lawyer acting for the lender, is standard practice on a private mortgage and something to insist on.
Your steps
Who's involved
Funds the mortgage, focusing on the property's value, and sets its own term, rate and renewal terms.
Arranges the mortgage and must give a written disclosure of costs and any conflict of interest before signing.
Reviews the disclosure and mortgage document, confirms priority on title, and provides independent legal advice.
Documents you will need
Tools for this stage
Answer five questions about your income, down payment and status, and see the paperwork a lender is likely to ask for, sorted to what applies to you. Your specific lender may ask for more, or less.
CalculatorRenew or switchUse this at renewal, to compare your lender's offer against switching elsewhere, over the term, after switching costs.
Guides to download
Questions people ask
Is a private mortgage legal in Ontario?
Yes. Private mortgages are a lawful form of financing, and brokers who arrange them are licensed and regulated under the Mortgage Brokerages, Lenders and Administrators Act, 2006, which requires written disclosure of costs and conflicts before signing.
What happens if I fall behind on a second mortgage but keep the first current?
The second mortgage's own lender can still pursue its remedies, including a power of sale, subject to the first mortgage's priority. Being current on one mortgage does not protect the property from action on the other.
Why is a private mortgage's cost usually higher?
Private lenders generally take on more risk, less standardized underwriting and often a shorter term, which is typically reflected in a higher rate and additional fees compared with a bank mortgage of the same amount.
Do I need my own lawyer, separate from the lender's?
It is standard practice, and often required by the lender, to have independent legal advice from a lawyer who does not also act for the lender, particularly on a private or second mortgage.
Can a private mortgage be paid off early without a charge?
It depends entirely on the term sheet for that specific mortgage; there is no standard rule. Confirm the early payout terms in writing before signing, since private mortgage terms vary far more than bank mortgages.
Also in this centre
Read more
Related centres
Other Learning Centres for the same transaction.
What happens between deciding to buy and settling into an Ontario home: budget and pre-approval, the search, the offer and its conditions, financing and inspection, closing day and the first year, with the legal layer explained at every step.
Related centreThe Selling a Home CentreEverything between deciding to sell an Ontario home and the money reaching your account: preparing, pricing, offers, the buyer's conditions, closing and tax, plus the situations that change the rules: tenants, estates and separation.
Sources
- Mortgage Brokerages, Lenders and Administrators Act, 2006
- FSRA: private mortgages
- Interest Act, s. 10 (mortgages over five years old)
General information about Ontario law as of 5 September 2026, not legal advice. It does not create a lawyer–client relationship.
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