Private Lending in Canada: How to Get the Best Rate (Not the Worst)

Book Your Strategy Call

Most Brokers Are Overcharging You on Private Mortgages

Here’s something that drives me nuts.

I’ve seen investors and homebuyers walk through our doors with private mortgage approvals at 9%, 10%, even 12% interest. And look — those rates aren’t unusual in the private lending world. That’s pretty much the average.

But here’s the thing. We’re getting private loans done at 5.99%. Low fees. Same type of deal.

So what gives?

The short answer: a lot of brokers take the path of least resistance. They hear “private lender” and they call the one contact they know will get it done. They’re focused on the approval — and yeah, the approval matters — but they’re skipping something just as critical: rate and terms.

That gap between 6% and 12% on a $400,000 mortgage? That’s roughly $24,000 a year in interest. On a short-term private loan, that difference can make or break your equity position when it’s time to sell or refinance.

Let me show you how to do this the right way.

Why Rate AND Exit Strategy Both Matter

When you go private, you need two things nailed down before you sign anything:

1. The best rate you can get. Not just any approval — the best approval.
2. A clear exit plan. How are you getting OUT of this private mortgage and into something traditional?

Here’s why both matter equally.

Say you’re a homebuyer who needs a private mortgage temporarily. Maybe you just moved provinces and haven’t started your new job yet. You get a private loan at 11% with interest-only payments. Six months later, you land your job and want to refinance — but you’ve paid zero principal down, and your equity hasn’t budged.

Now compare that to getting a private loan at 5.99%. Your payments are lower. You’re preserving more equity. When you refinance into a traditional mortgage six months later, you’re in a way stronger position.

The rate isn’t just a number on paper. It directly affects your financial flexibility down the road.

If you’re looking at private rates above 8%, you’re probably talking to a lazy broker — book a free strategy call at book a free strategy call with LendCity and we’ll show you what your actual options are at rates as low as 5.99%.

Creative Ways to Use Private Lending (Beyond Bad Credit)

Most people hear “private lending” and think: bad credit, last resort, desperate times.

That’s one use case, sure. But here are real scenarios where private lending is actually the smart play:

Moving Between Provinces

You’re a nurse moving from Alberta to Saskatchewan. You haven’t lined up your new job yet, but we know what nurses earn in Saskatchewan. We use tools like Glassdoor and even AI research to find the average income for your role in the new area.

Then we get you approved for a private loan based on what you’ll realistically earn — not what you’re currently making (which is nothing, since you just moved). Once you land the job? We switch you to a traditional lender. Done.

Bridge Loans When Your Home Hasn’t Sold Yet

You’ve got tons of equity in your current home. You want to buy the next one. But the market’s slow and your place hasn’t sold.

A bank could technically refinance your existing home and fund the new purchase — but what if you don’t qualify to carry both mortgages? Most people don’t. Working with Residential Mortgage Financing helps you explore all your options before resorting to a private bridge loan at higher rates.

So we set up a blanket loan or bridge loan with a private lender. It covers both properties. You buy the new home, sell the old one at your own pace, pay off the private loan, and then we replace everything with a traditional mortgage.

That’s the kind of creative problem-solving that makes private lending powerful.

Renovation and Value-Add Projects

You’re an investor buying a property that needs serious work. Banks won’t touch it in its current condition. A private lender funds the purchase and renovation, and once the property is stabilized, you refinance into a conventional mortgage at a much better rate.

This is basically the The BRRRR Method: Build a Rental Portfolio Fast — and private lending is the engine that makes it run.

What About Fees? Let’s Talk Real Numbers

Fees are where a lot of borrowers get burned. Some brokers see a private deal as a payday because the client has “no other options.” They’ll charge 3%, 4%, sometimes more.

Here’s what fair looks like: 1% to 2% broker fee, depending on loan size. On larger loans, it goes down to 1%. On smaller loans, it might be 2%. That’s it.

The lender also has their own fee — but sometimes the lender pays the broker directly. When that happens, the broker fee to you drops or disappears entirely.

So when you’re evaluating a private mortgage offer, ask these questions:

• What’s the interest rate?
• What’s the lender fee?
• What’s the broker fee?
• Is this interest-only or amortized?
• What’s my exit strategy and timeline?

If your broker can’t answer all five clearly, that’s a red flag.

Before you sign a private mortgage, you need to know your exit strategy — schedule a free strategy session with us and we’ll map out exactly when and how you’ll refinance into a traditional mortgage so you’re not stuck paying private rates forever.

When to Say No to a Private Mortgage

This is the part most people don’t talk about.

We actually turned down a client recently. She had a big down payment and wanted to buy a home because she was having issues with her family and needed to move out. On paper, it looked doable.

But she couldn’t afford the payments. Not even close.

Getting her approved would’ve set her up for failure. Six months down the road, she’d be behind on payments with a private lender breathing down her neck. That’s not helping anyone.

Her realtor agreed completely. They said, “I don’t want that on my name.”

That’s the right mindset. A good mortgage professional doesn’t just get approvals — they protect clients from bad deals. And a good realtor wants the same thing.

The Bottom Line on Private Lending

Private lending is a tool. Like any tool, it’s incredibly useful when you use it correctly and dangerous when you don’t.

Here’s your checklist:

• Shop the rate. Don’t accept the first private lender your broker calls. There are lenders out there at 5.99% while others charge 12% for the same deal.
• Know your exit. Every private loan should have a clear path to a traditional mortgage.
• Watch the fees. Fair is 1-2%. Anything above that, ask why.
• Be honest about affordability. If you can’t carry the payments, the approval isn’t doing you any favors.
• Work with a broker who does the homework. The lazy ones cost you thousands.

Do this right, and private lending becomes a springboard — not a trap.

Book Your Strategy Call

Frequently Asked Questions

Written by

LendCity

Published

February 9, 2026

Reading Time

7 min read

Share this article

Tags

Mortgage Basics Mortgage Brokers Mortgage Costs Getting Started Refinancing

Key Terms in This Article

Private Lending

Private Lending

Private lending involves obtaining mortgage financing from individual investors or non-institutional lenders rather than banks or credit unions, typically at higher interest rates but with more flexible qualification criteria. For Canadian real estate investors, private lenders offer a valuable alternative funding source for deals that may not meet traditional lending requirements, such as properties needing significant renovation or situations requiring fast closing timelines.

Bridge Loan

Bridge Loan

A bridge loan is a short-term financing solution that allows Canadian real estate investors to access the equity in their existing property to fund the purchase of a new property before the current one has sold. It "bridges" the gap between the closing date of a new purchase and the sale of an existing property, typically carrying higher interest rates and lasting from a few weeks to several months.

Exit Strategy

Exit Strategy

An exit strategy is a predetermined plan outlining how a real estate investor intends to dispose of or transition out of a property investment to realize profits or minimize losses, such as selling, refinancing, converting to a different use, or transferring to a long-term hold. For Canadian investors, having a clear exit strategy is especially important when dealing with short-term financing like private mortgages or bridge loans, as lenders typically require borrowers to demonstrate a viable plan for repaying the loan within the term.

Interest Only Mortgage

Interest-Only Mortgage

An interest-only mortgage allows the borrower to pay only the interest portion of the loan for a set period, typically ranging from five to ten years, after which payments increase to include principal repayment. For Canadian real estate investors, this structure maximizes cash flow during the interest-only period, freeing up capital for other investments or property improvements, though it means no equity is built through payments until the principal repayment phase begins.

Broker Fees

Broker Fees

Broker fees are the commissions or charges paid to a mortgage broker for arranging financing on behalf of a borrower, typically ranging from 0.5% to 2% of the loan amount in Canada, though they may be higher for complex or private lending arrangements. For real estate investors, these fees are a tax-deductible financing cost and are especially common when securing non-traditional mortgages for investment properties that may not qualify through standard lender channels.

Blanket Loan

Blanket Loan

A blanket loan is a single mortgage that finances multiple properties under one loan agreement, allowing Canadian real estate investors to consolidate financing for several investment properties rather than maintaining separate mortgages for each. This can simplify portfolio management and potentially offer better terms, though a release clause is typically negotiated to allow individual properties to be sold without triggering full repayment of the entire loan.

Traditional Lender

Traditional Lender

A traditional lender is a federally or provincially regulated financial institution, such as a major bank or credit union, that offers mortgage financing with standardized qualification criteria including stress tests, income verification, and typically the most competitive interest rates. For Canadian real estate investors, traditional lenders usually offer the best rates but impose stricter requirements around debt service ratios and the number of financed properties allowed, which can limit portfolio growth.

Private Mortgage Rate

Private Mortgage Rate

A private mortgage rate is the interest rate charged by non-institutional lenders such as individuals or private lending companies, typically ranging from 8% to 18% in Canada, and is significantly higher than bank rates to compensate for the increased risk of lending to borrowers who may not qualify for conventional financing. For Canadian real estate investors, private mortgages can provide short-term bridge financing or fund deals quickly when traditional lenders decline, but the higher carrying costs must be carefully factored into investment returns.

Hover over terms to see definitions, or visit our glossary for the full list.

Related Articles

• 8 Ways to Save $45K on Your Mortgage (Beyond Rate)
• Mortgage Brokers vs Banks: Which Is Better?
• Best Mortgage Rates in Windsor Ontario
• Getting a Mortgage While On Probation in Canada
• Mortgage Stress Test Canada: How It Cuts Your Buying Power