Private mortgages have a reputation problem. Many people think they are a last resort for desperate borrowers. The truth is more nuanced — in many situations, a private mortgage is the smartest financial move you can make.
Let us break down exactly when private lending makes sense, what it costs, and how we use it as a strategic tool at Echelon7 Mortgages.
What Is a Private Mortgage?
A private mortgage is a loan from a non-institutional lender — an individual investor or a private lending company — secured against your property. Unlike banks, private lenders focus primarily on the property value and your equity position rather than your income documentation or credit score.
When Private Lending Makes Sense
Here are the most common scenarios where we recommend private mortgages to our BC clients:
- Bridge financing: You need to close on your new home before your current one sells. A 3-6 month private loan bridges the gap.
- Credit rebuilding: After a consumer proposal or bankruptcy, you need 2 years to qualify with a traditional lender. A private mortgage lets you buy now and refinance later.
- Quick closing: The deal needs to close in 5-10 days and no bank can move that fast.
- Construction or renovation: You need funds to complete a major renovation before refinancing.
- Self-employed with complex income: When even alternative lender programs cannot work, a private first mortgage can be the entry point.
- Debt consolidation urgency: High-interest debts need to be paid off immediately to stop the bleeding.
What It Costs
Private mortgage rates in BC typically range from 7% to 12%, with a 1-3% lender fee. Terms are usually 1 year. That sounds expensive compared to bank rates — and it is. But here is the key: private mortgages are meant to be temporary.
We structure every private deal with a clear exit strategy. The goal is always to transition you to a lower-rate lender within 6-12 months.
When Private Lending Does NOT Make Sense
We will be honest: private mortgages are wrong for some situations.
- If you cannot realistically improve your situation within 12 months.
- If you are already overleveraged and adding more debt will not solve the problem.
- If the property does not have enough equity to protect you (and the lender).
- If a B-lender alternative is available at a much lower rate.
Our Approach
At Echelon7 Mortgages, we have access to a network of vetted private lenders across BC. Every private deal we structure includes a written exit plan — how and when we will move you to a better rate. Contact us for a free assessment of your options.