Private first mortgage

A private mortgage is a loan granted by a lender that is not a bank or credit union: an individual, a group of investors or a lending company. As with a traditional mortgage, the loan is secured by real estate and the mortgage is published in the land register.

The key difference lies in the analysis. Where a financial institution applies strict debt ratios and credit criteria, a private lender looks first at the value of the property, the available equity and the exit strategy, meaning how the loan will be repaid or refinanced at maturity.

In exchange for this flexibility, the cost is generally higher than a bank mortgage and terms are often short. A private mortgage is usually a transitional solution, not long-term financing.

• A bank refusal because of your credit score, a history of late payments or a recent consumer proposal;
• income that is hard to prove under bank criteria, for example for a self-employed worker;
• a need for funds within a timeframe the bank process can't meet;
• receipt of a 60-day notice or other proceedings from a creditor;
• debts to combine when consolidation isn't possible with an institution;
• tax or municipal debts that must be settled quickly (see urgent funding).

In every case, the central question remains the same: does the loan genuinely improve the situation, and is there a realistic plan to get out of it?

A first-ranking loan means the private lender holds the first mortgage on the property. If the property is sold or the lender takes legal action, it is repaid first. This is often the option considered when the property is mortgage-free, or when the existing mortgage is paid off in full by the new loan.

If you would rather keep your current mortgage and borrow against the remaining equity, a private second mortgage is the right fit.

1. Application and discussion: you describe your situation, the amount you need and the purpose of the financing.
2. File review: we examine the property, the available equity, existing debts and the repayment strategy.
3. Lender search: your file is presented to lenders in our network whose criteria match your situation.
4. Offer and terms: you receive the proposed terms (rate, term, fees) so you can compare them before deciding.
5. Appraisal and notary: the lender may require an appraisal of the property; the mortgage deed is signed before a notary.
6. Disbursement: the funds are released by the notary, who pays off the designated creditors if needed.

A bank refusal doesn't mean a file is a dead end. Financial institutions are bound by precise qualification rules, and several common situations lead them to say no:

• debt service ratios (GDS/TDS) above the allowed thresholds;
• a credit score below the required minimum, or recent events on your credit report;
• self-employed, seasonal or recent income that is hard to document;
• a type or condition of property that doesn't match their criteria.

A private lender may accept some of these files, but not all: the value of the property and the ability to repay at maturity remain decisive.

• photo ID;
• a recent mortgage statement, if applicable;
• municipal and school tax bills;
• proof of income (pay stubs, notices of assessment, financial statements if self-employed);
• statements for the debts to be repaid, if applicable;
• any notice received from a creditor (prior notice, demand letter).

The exact list varies by lender and by file. It helps to gather what you have from the start, even if it isn't complete.