How to Invest in Private Mortgages in Canada (2026 Guide)

If you have capital sitting in a savings account earning 3–4%, private mortgage investing is one way Canadians put that money to work in real estate without buying a rental property. You become the lender. The borrower pays you interest. Your capital is secured by a legal mortgage registered against the property.

This guide explains how private mortgage investing works in Canada, what returns look like, how you are protected, and what to check before lending a dollar.

Important — private mortgage investments may be securities. In Canada, arrangements where passive investors provide capital and rely on another party’s efforts for returns are often treated as securities distributions under National Instrument 45-106. LendCity Mortgages is a mortgage brokerage, not a registered exempt-market dealer or investment advisor. We do not sell, recommend, or solicit securities. This article is educational only. Consult a registered dealer, securities lawyer, and tax professional before investing.

What Is Private Mortgage Investing?

Private mortgage investing means lending your own capital — cash, or funds in a self-directed RRSP or TFSA — to a borrower who puts up real estate as collateral. You hold a registered mortgage on the property title, just like a bank would.

Your Role	What You Receive	What Secures You
Lender	Fixed interest (monthly or quarterly)	Legal mortgage on the property
At term end	Principal returned or rolled to new deal	Power of Sale if borrower defaults

Borrowers use private mortgages when they need speed, flexibility, or financing that banks won’t provide — bridge loans during renovations, construction gaps, or credit recovery situations.

How Returns Compare to Other Options

Private mortgage investing targets higher yields than GICs or bonds because you are taking on more risk than a government-guaranteed product.

Investment	Typical Yield	Liquidity	Real Estate Exposure
GIC / savings	3–5%	High	None
REIT (public)	4–7% dividend	High (traded)	Indirect
Private mortgage	10–12% target	Low (term-locked)	Secured by property
Rental property	5–8%+ cash-on-cash	Low	Direct ownership

The trade-off is clear: you earn more, but your capital is committed for the mortgage term and you depend on the property value and borrower performance.

Use our passive yield calculator to model monthly cash flow on a specific loan amount and rate before you commit.

Three Ways Canadians Invest in Private Mortgages

1. Direct Private Lending

You lend directly to a borrower. A mortgage is registered in your name at the land registry. Interest is paid to you. At maturity, principal is returned or you choose to roll into a new opportunity.

Best for: Investors who want full control, direct security in their name, and the ability to use registered accounts.

Typical minimum: $25,000+

2. Mortgage Investment Corporations (MICs)

MICs pool capital from multiple investors and deploy it across a portfolio of mortgages. You buy shares in the MIC rather than holding individual mortgages.

Our MIC guide covers how they work, risks, and evaluation criteria — but remember, MIC shares are securities distributed through registered dealers.

Best for: Investors who want diversification across many loans without selecting individual deals.

3. Syndicated or Broker-Facilitated Deals

A mortgage broker or facilitator sources the deal, coordinates legal documentation, and connects lenders with borrowers. You still hold the mortgage in your name, but the sourcing and paperwork are handled professionally.

Best for: Investors who want direct security without sourcing their own deals.

Using Your RRSP or TFSA

One of the most powerful aspects of private mortgage investing in Canada is registered account eligibility. Through a self-directed RRSP or TFSA, you can earn interest tax-free (TFSA) or tax-deferred (RRSP).

Our RRSP real estate investing guide covers the mechanics — but the key point is that the mortgage must be structured properly with an approved trustee. For a full walkthrough, see our RRSP private mortgage investing step-by-step guide. Not every private deal qualifies for registered accounts.

Account	Tax Treatment	Best Use
TFSA	Tax-free interest	Maximizing after-tax yield
RRSP	Tax-deferred growth	High-income earners reducing current tax
Non-registered	Fully taxable interest	Simplest structure, no trustee needed

How You Are Protected

Private mortgage investing is secured lending. That means the property backs your capital.

The Mortgage Charge

A lawyer registers your mortgage on the property title. You are a secured creditor. If the borrower stops paying, you have legal remedies.

Loan-to-Value (LTV) Safety Margin

Conservative private mortgages target 65–75% LTV — meaning the property is worth significantly more than the loan amount. This cushion protects you if the property must be sold.

Example: A $500,000 property with a $350,000 mortgage = 70% LTV. Even if the property sells at a 15% discount ($425,000), your principal is still covered.

Power of Sale

In most Canadian provinces, the Power of Sale process allows a secured lender to sell the property to recover unpaid principal and interest. This is your backstop — not a profit strategy, but a recovery mechanism.

Lawyer Trust Accounts

Capital should move through a lawyer’s trust account — never directly to the borrower. The lawyer handles registration, disbursement, and documentation.

Due Diligence Checklist Before You Lend

Never lend based on a rate sheet alone. Run through this checklist on every deal:

1. Property appraisal or verified value — Is the property worth what they claim?
2. LTV ratio — Is there enough equity cushion?
3. Borrower profile — Track record, exit strategy, and reason for private financing
4. Title search — No undisclosed liens or encumbrances ahead of your charge
5. Insurance — Property insurance is current and names the lender
6. Legal documentation — Commitment letter, mortgage terms, and trust account instructions reviewed by your own lawyer
7. Payment structure — Monthly interest? Interest reserve? What happens at maturity?
8. Registered account compatibility — If using RRSP/TFSA, confirm trustee approval

Private Lending vs. Development Equity

Some investors confuse private mortgage lending with development partnerships. They are different paths:

	Private Mortgage	Development Equity
You are	A lender	An equity partner
Return	Fixed interest	Profit share + appreciation
Timeline	6–24 months	2–5 years
Minimum	~$25,000	~$100,000
Risk	Secured debt	Project execution risk

If development equity interests you, see our development investing guide and development partnerships page.

For a full comparison of both paths, visit our invest in real estate hub.

Common Mistakes to Avoid

Chasing yield without checking LTV. A 14% rate on a 90% LTV deal is not safer than 10% at 65% LTV.

Skipping independent legal review. The borrower’s lawyer works for the borrower. Have your own counsel review the mortgage.

Ignoring the exit strategy. Every private mortgage needs a clear plan for how the borrower repays at term — refinance, sale, or construction completion.

Mixing up securities and mortgages. If you are a passive investor relying on someone else to manage the lending, securities laws may apply. Structure matters.

Frequently Asked Questions

What is the minimum to invest in private mortgages?

Direct private lending opportunities typically start around $25,000. Larger development-related loans may require $50,000 or more. MIC minimums vary by corporation.

How long is my money locked up?

Most private mortgages run 6 to 24 months. Your capital is committed for the term unless the borrower prepays. Plan accordingly — this is not a savings account.

What returns can I expect?

Target yields of 10–12% annually are common in the current market, but actual returns depend on the deal, LTV, borrower risk, and whether you use registered accounts for tax advantages. Past performance is not a guarantee.

Is private mortgage investing safe?

No investment is risk-free. Private mortgages are secured by real estate, which provides meaningful protection, but borrower default, property value decline, and legal costs are real risks. Conservative LTV and thorough due diligence are essential.

Can LendCity help me find private mortgage opportunities?

LendCity connects capital providers with vetted Canadian real estate lending opportunities. Book a strategy call to review current deals and discuss whether private lending fits your goals.

Next Steps

Private mortgage investing lets you earn real estate-backed returns without managing tenants or renovations. The keys are conservative LTV, proper legal structure, and deals you understand.

Ready to explore current opportunities? Visit our private mortgage investing page or book a call with Scott to review available deals.

For the development equity path, see invest in real estate projects on our partnerships page.