How to Qualify for a Private Mortgage in Canada

Why Private Mortgages Are a Growing Option in Canada

The Canadian mortgage landscape has changed dramatically in recent years. As home prices continue to rise, lending criteria at traditional banks have become more restrictive. For many borrowers—especially the self-employed, credit-challenged, or those with non-traditional income—a bank mortgage simply isn’t an option.

That’s why private mortgages have gained popularity across Canada. But what exactly do you need to qualify?

In this detailed guide, we’ll explain how to qualify for a private mortgage in Canada, breaking down what private lenders look for, the documents you’ll need, and pro tips to boost your approval odds—even if you’ve been turned down by a bank.

What Is a Private Mortgage?

A private mortgage is a loan secured against your property, funded by an individual or private lending company—not a traditional bank or credit union. These alternative mortgage lenders assess applications using criteria that are more flexible and focused on equity and asset value, not just credit scores or employment history.

Private mortgages are usually short-term (1 to 3 years), and are used for:

  • Home purchases
  • Debt consolidation
  • Bridge financing
  • Investment property purchases
  • Mortgage refinancing
  • Home equity extraction

Who Are Private Mortgages For?

You may consider a private mortgage if:

  • You are self-employed or have unpredictable income
  • You have bad credit or past bankruptcy
  • You need fast mortgage approval
  • You want to purchase an unconventional property
  • You’ve been turned down by traditional lenders
  • You want to access home equity without refinancing with a bank

Now let’s look at the core criteria that impact your private mortgage approval.

1. Home Equity: The Cornerstone of Private Lending

Private mortgage lenders focus primarily on the value of your home rather than your income or credit score. They evaluate the Loan-to-Value (LTV) ratio, which compares your loan amount to your home’s appraised value.

💡 Loan-to-Value Ratio (LTV) Explained

LTV = (Loan Amount ÷ Appraised Property Value) × 100

Most private lenders in Canada are comfortable with an LTV of 65% to 75%. Some may go up to 80%, but higher ratios often come with increased interest rates and lender fees.

Example:

  • Appraised Property Value: $800,000
  • Requested Loan: $600,000
  • LTV = (600,000 ÷ 800,000) × 100 = 75%

In this case, your loan would likely qualify under standard private lending guidelines.

🔎 Tip:

To increase your chances of approval, ensure your property has strong resale value and is located in a major urban area like Toronto, Vancouver, or Calgary. Lenders prefer real estate that can be liquidated quickly in case of default.

2. Income Verification: Non-Traditional Is Welcome

Private lenders do not require traditional job letters or T4 slips. Instead, they accept a broader range of proof-of-income documents, especially for:

  • Self-employed individuals
  • Commission-based earners
  • Gig economy workers
  • Investors with rental income

Common Documents You Can Use:

  • 6–12 months of bank statements
  • Notice of Assessments (NOA) from the CRA
  • Lease agreements (if you’re a landlord)
  • Invoices and contracts (for freelancers)
  • Investment income summaries

Even though income may be secondary to home equity, showing your ability to make monthly interest payments will significantly improve your approval odds.

3. Credit History: Less Important, But Still Reviewed

Traditional banks require a minimum credit score of 680+ for mortgage approval. In contrast, private lenders may accept scores as low as 500 or even approve applicants with:

  • Past bankruptcies
  • Consumer proposals
  • Missed or late payments
  • High credit utilization

Why Credit Still Matters:

While private lenders are more lenient, your credit score still influences:

  • The interest rate you’ll pay
  • Whether the lender requires a co-signer
  • Loan term flexibility

The good news? Many borrowers use private mortgages as a short-term solution while rebuilding credit and eventually refinance with a bank.

4. Property Type and Location

Since your property serves as collateral for the loan, the lender must be confident that it holds value. Some property types are more likely to be approved than others.

✅ Preferred Property Types:

  • Detached homes
  • Townhouses
  • Condominiums in major cities
  • Multi-unit residential properties

❌ Riskier or Difficult Properties:

  • Raw land
  • Mobile homes
  • Properties in rural or remote areas
  • Commercial or industrial real estate (unless with a specialized lender)

Location Matters:

Lenders are more comfortable with properties in major metropolitan areas where the real estate market is stable and there’s higher demand. Properties in rural locations may require a lower LTV or carry higher interest rates.

5. Exit Strategy: Your Plan to Repay or Refinance

Private mortgages are short-term solutions, not long-term loans. Most terms are 6 months to 3 years, and lenders want to know how you plan to repay or transition out of the mortgage.

Strong Exit Strategies Include:

  • Refinancing with a traditional bank after improving credit
  • Selling the property
  • Receiving an inheritance or insurance payout
  • Income increase through a new job or business

Not having a clear plan may result in higher lender fees, non-renewal, or forced sale of your property.

How to Improve Your Chances of Private Mortgage Approval

Here are strategic tips to improve your private loan eligibility:

✔ 1. Lower Your LTV

  • Make a larger down payment or pay down existing debt to increase home equity.
  • Refinance only what you need—not your full equity.

✔ 2. Organize Your Finances

  • Prepare documentation that supports your ability to repay the loan.
  • Create a simple, clear income summary—even if it’s irregular.

✔ 3. Address Past Credit Issues

  • Write a letter of explanation for late payments or collections.
  • Begin rebuilding credit with secured credit cards or consistent bill payments.

✔ 4. Choose the Right Mortgage Broker

  • Work with a broker who specializes in private and alternative lending in Canada.
  • They can connect you with lenders who are more likely to approve your specific case.

✔ 5. Consider a Co-Signer

If your income or credit history is weak, a co-signer can strengthen your application and help secure better terms.

The Private Mortgage Approval Process: What to Expect

Step-by-Step Timeline:

  1. Initial Consultation
     Review your needs, discuss goals, and submit basic information.
  2. Property Appraisal
     Ordered by the lender to confirm current market value.
  3. Document Submission
     Income verification, ID, property tax bill, and existing mortgage statement.
  4. Term Sheet Issued
     Outlines the loan amount, rate, term, fees, and conditions.
  5. Independent Legal Review
     You’ll need a lawyer to review and finalize all legal documents.
  6. Funding & Disbursement
     Loan is registered against your property and funds are released.

🕒 This process can take as little as 3–10 business days, depending on how quickly documents are submitted.

Conclusion: How to Secure a Private Mortgage in Canada

If you’re exploring how to qualify for a private mortgage in Canada, you’re not alone. Private mortgages offer flexibility, speed, and access that traditional banks often can’t provide.

To recap, private lenders focus on:

  • Home equity and LTV
  • Income, even if non-traditional
  • Credit history (but they’re lenient)
  • Property type and location
  • Exit strategy for repayment

With the right documents, guidance, and strategy, you can get approved—even if you’ve been rejected by a bank.

✅ Ready to Qualify for a Private Mortgage?

If you’re self-employed, rebuilding credit, or simply need fast financing,
👉 Connect with Equity Mainly Matters—Canada’s trusted experts in private mortgage approval.

Get personalized support, lender-matching, and access to funding in as little as 3 days.