If you’re buying an apartment building in Canada, you’ve got two fundamentally different financing paths: private lending and CMHC-insured mortgages. They’re not just different interest rates. They’re entirely different financing philosophies — and which one works for you depends on where you are in your deal, what the property looks like, and how fast you need to close.
Let me break down the real differences, the actual numbers, and when each one makes sense.
The Two Ends of the Financing Spectrum
Private lending and CMHC sit at opposite ends of the multifamily financing spectrum. Understanding where each sits helps you see when one clearly works better than the other.
CMHC is the government-backed option. Lowest rates. Longest amortizations. Most stringent underwriting. Slowest approval timeline. The path when your property is stabilized, meets standards, and you’re willing to wait.
Private lending is the speed and flexibility option. Higher rates. Shorter terms. Fast closings. Minimal property condition requirements. The path when you need to move fast, the property doesn’t fit CMHC boxes, or you need capital immediately.
Think of CMHC as a 40-mile-per-hour thoroughfare — safe, economical, but takes forever to get there. Private lending is the express lane — you’ll pay more per mile, but you’re getting to your destination in half the time.
Head-to-Head Comparison: The Numbers That Matter
Here’s how they actually stack up across the critical dimensions:
| Feature | Private Lending | CMHC MLI Standard | CMHC MLI Select (100+ Points) |
|---|---|---|---|
| Interest Rate | 7.5% – 10.5% | 4.99% – 5.99% | 4.49% – 5.49% |
| Maximum LTV | 75% – 80% | 85% | 95% |
| Maximum Amortization | 10 years (usually 5-7) | 40 years | 50 years |
| Time to Closing | 10 – 30 days | 90 – 120 days | 120 – 180 days |
| DSCR Required | 1.15x – 1.25x typical | 1.20x – 1.35x (stricter) | 1.10x+ (more flexible) |
| Recourse | Full recourse | Full recourse | Limited recourse (MLI Select only) |
| Property Condition | As-is accepted | Must meet standards | New/near-new preferred |
| Documentation | Minimal, fast | Full underwriting | Full underwriting + points validation |
| Borrower Experience | Some flexibility | Professional/track record | Professional/track record |
| Prepayment Penalty | Varies (often minimal) | Standard penalties | Standard penalties |
| Flexibility on Terms | Very flexible | Standard terms | Standard terms |
The gap between 7.99% private and 5.25% CMHC on a $2 million apartment building is roughly $55,000 per year in interest. Over a 5-year private mortgage, that’s a quarter million dollars. That’s why private lending is a bridge strategy — not a forever solution.
When CMHC Is the Clear Winner
CMHC makes sense when:
1. Your Property Is Stabilized
You’ve owned the building for 18+ months, it’s occupied at or near market rates, and the financials are predictable. CMHC loves stability. The longer you’ve owned it, the easier the underwriting.
2. Your DSCR Is Strong
If your debt service coverage ratio is 1.35x or higher, CMHC will approve you confidently at their best rates. Banks reward strong cash flow. You want to show them this isn’t a speculation play — it’s a cash-flowing asset.
3. You’re Willing to Wait
You have 4-5 months for approval. You’re not closing in 30 days. You’re not racing against competing offers. CMHC approvals are thorough. They take time.
4. You Want the Best Rate and Longest Amortization
CMHC at 5.25% with 40-year amortization versus private at 8.5% with 7-year amortization is not even a contest. The payment difference is massive. If you’re holding for cash flow and can qualify, CMHC wins.
5. The Property Meets CMHC Standards
No deferred maintenance. Mechanical systems are current. The property doesn’t need cosmetic work. It’s a performing asset right now. CMHC checks every box on their property condition checklist.
Real Example: The Stabilized Apartment Building
Property: 12-unit apartment building, $2.4 million purchase price, existing owner-occupied plus 11 rental units.
Scenario: You’re an experienced investor with a strong portfolio. The property is 85% occupied, rents are at or near market, DSCR is 1.32x.
CMHC Option:
- Loan amount: $2.04 million (85% LTV)
- Rate: 5.25%
- Amortization: 40 years
- Monthly payment: $11,200
- Total interest over 40 years: $3.25 million
Private Option:
- Loan amount: $1.92 million (80% LTV)
- Rate: 8.5%
- Amortization: 7 years
- Monthly payment: $31,100
- Total interest over 7 years: $615,000
- Exit plan: Refinance to CMHC after year 3 when building stabilizes further
If you choose CMHC and have the time to wait, you save $19,900 per month in payments while carrying the same property. Over five years, that’s $1.19 million in cash flow difference.
When Private Lending Makes More Sense
Private lending wins when:
1. The Property Needs Work Before It Can Be Financed Traditionally
The building needs HVAC replacement, the roof has 3-5 years left, the parking lot is cracked. It’s not uninhabitable, but it’s not “bank ready.” CMHC will order appraisals and inspections. They’ll identify deferred maintenance. They’ll require repairs before funding.
A private lender funds as-is, you close fast, you renovate, and then you refinance into CMHC at better terms.
2. You Need to Close in 30 Days or Less
Competition is fierce. The seller has multiple offers. You need to win by being fastest. CMHC approval takes 120+ days minimum. Private closes in 10-30 days. Private is your only option.
3. The Property Doesn’t Meet CMHC’s Occupancy or DSCR Requirements Yet
You’re buying a building that’s 60% occupied. It’s got potential, but CMHC won’t lend on potential — they lend on current performance. DSCR is 0.95x right now (negative cash flow). CMHC will reject this outright.
A private lender funds based on after-repair value and your experience. You take possession, raise rents, fill vacancies, stabilize operations, then refinance into CMHC 18 months later.
4. Your Experience Profile Doesn’t Fit CMHC’s Box
You’re relatively new to multifamily. Or you have one success under your belt. Or you’re partnering with a capital provider who doesn’t have personal real estate experience. CMHC wants to see track record. They’re conservative about who they’ll lend to.
Private lenders care less about your pedigree and more about your equity position, property fundamentals, and exit plan.
5. You’re Using a “Bridge to CMHC” Strategy
This is the most common smart move: buy with private lending at 75% LTV, renovate and stabilize, then refinance into CMHC for permanent financing. This is how savvy investors play the game.
Real Example: The Value-Add Apartment Building
Property: 8-unit apartment building, $1.6 million asking price. 50% occupied at below-market rents. Roof has 4 years left. Mechanical systems are aging. DSCR is 0.88x (negative cash flow).
Why CMHC Won’t Touch It:
- Occupancy below their threshold
- DSCR below 1.20x minimum
- Deferred maintenance identified in appraisal
- Would require extensive repairs before funding
Private Option:
- Loan amount: $1.2 million (75% LTV)
- Rate: 8.75%
- Amortization: 5 years
- Monthly payment: $24,100
- Closing timeline: 3 weeks
- Your equity position: $400,000
- Plan: 18-month stabilization, then refinance to CMHC
What You Do During the Private Loan Period:
- Year 1: Replace roof ($45K), upgrade 3 units ($60K), raise rents to market, fill vacancies
- Year 18: Building is now 95% occupied at market rents, DSCR is 1.35x, property is CMHC-ready
- Refinance to CMHC at 5.5%, 40-year amortization, $1.32M loan
- New payment: $7,700/month
- Your total interest paid to private lender: $96,000
- Your savings on permanent financing: hundreds of thousands over 40-year hold
The private mortgage costs you $96,000 in interest, but it unlocked a deal that CMHC wouldn’t touch. That deal is now generating $8,000/month positive cash flow in year 2 instead of negative.
The Bridge Strategy: Private Then CMHC (The Most Common Path)
Here’s the playbook used by experienced multifamily investors repeatedly:
Phase 1: Acquisition (Private Lending)
- Find an apartment building that needs work or isn’t stabilized yet
- Get private financing at 65-75% LTV, close in 3-4 weeks
- You put in $400K-$500K equity on a $1.6M building
- Private loan rate: 8.5%, 5-year term
Phase 2: Stabilization (Your Work)
- 12-18 months of operational improvements
- Renovations (roof, HVAC, cosmetics)
- Rent increases to market
- Vacancy reduction from 40% to 95%+
- DSCR improvement from 0.95x to 1.35x+
Phase 3: Refinance to CMHC (Permanent Financing)
- Year 18: Property is now stabilized and CMHC-ready
- Apply for CMHC MLI Standard or MLI Select
- Get approved for $1.32M at 5.25%, 40-year amortization
- Use the proceeds to pay off private lender
- Lock in long-term rate with extended amortization
- Profit from permanent financing advantage
Total Cost of Private Bridge:
- Private loan interest (18 months): $96,000
- Total cost of capital: $96,000
Total Benefit:
- Property appreciation during stabilization: $200K-$400K
- Cash flow improvement: $8,000/month ongoing
- Better permanent terms: 40-year amortization instead of seeking a 10-year traditional
- Permanent financing rate: 5.25% instead of shopping for 6.75% on a non-stabilized property
The private loan isn’t permanent debt — it’s a turnaround vehicle. You’re renting capital for 18 months to unlock a property CMHC wouldn’t finance. The cost is real, but the upside dwarfs it.
Real Cost Comparison: Same Property, Different Financing
Let’s run a concrete example showing the total cost of ownership under both financing paths.
The Property:
- 15-unit apartment building
- Purchase price: $3 million
- Current occupancy: 65%
- Current rents: $900/unit/month (below market)
- Market rents: $1,200/unit/month
- Current DSCR: 1.08x (barely serviceable)
- Deferred maintenance: Roof (8 years old, 5-7 years left), HVAC (aging)
Path 1: Pure CMHC (Waiting for Stabilization)
In real life, this building won’t qualify for CMHC today. So you’d need to stabilize it first without financing. Not practical. But let’s say you find a private source for an owner-occupied purchase, hold it 18 months, then refinance:
- Wait 18 months for stabilization
- Then apply for CMHC MLI Standard
- Loan amount: $2.55 million (85% LTV)
- Rate: 5.5%
- Amortization: 40 years
- Monthly payment: $14,450
- Interest paid over 40 years: $3.57 million
Path 2: Private Bridge, Then CMHC (Smart Investor Approach)
-
Year 0: Close with private lending
- Loan: $2.25 million (75% LTV)
- Rate: 8.75%
- Term: 5 years (planning exit at year 18 months)
- Monthly payment: $46,800
-
Year 1.5: Refinance to CMHC
- Renovation complete, occupancy 95%, rents at market, DSCR 1.35x
- Loan: $2.55 million (85% LTV) — actually gets you more debt at better terms
- Rate: 5.25%
- Amortization: 40 years
- Monthly payment: $14,200
Total Interest Comparison:
- Path 1 (Wait for stabilization, then CMHC): $3.57 million interest
- Path 2 (Private bridge, then CMHC): $432,000 private interest + $2.94 million CMHC interest = $3.37 million
Wait, that doesn’t seem like a win. But there’s the real magic: During the private loan period, you’re capturing equity appreciation.
- Property appreciation (18 months): $250K-$400K (based on renovations + rent growth)
- Equity paid down: $80K (from excess cash flow)
- DSCR improvement: 0.95x → 1.35x (permanently improves your financing options)
- Cash flow in years 2-40: $8,000-$10,000/month positive (versus break-even under path 1)
The private bridge loan costs you $432,000 in interest, but you’ve gained $330,000-$480,000 in equity appreciation plus 40 years of $8,000/month cash flow. The breakeven is in month 10.
Hybrid Approaches: First and Second Mortgages, Combination Financing
Sometimes the best financing structure mixes both options.
Scenario 1: First Mortgage CMHC + Second Mortgage Private
You’re buying a $3 million apartment building that CMHC will approve, but only at 70% LTV ($2.1 million). You’ve got $600K equity and need $300K more.
Option A (All-in): Get CMHC to 80% ($2.4 million), then find another lender for the remaining $300K at a higher rate.
Option B (Better): Get CMHC for 70% at 5.5%, then get a private second mortgage for the next 10% at 9% on top of the first. You’ve locked in CMHC’s rate for the primary debt while using private for the gap.
Scenario 2: Construction Loan (Private) → Permanent (CMHC)
You’re developing new apartment units. Traditional banks don’t do construction financing, but private lenders do. Close construction at 8.5%, run the lease-up, then refinance to CMHC permanent mortgage at 5.25%.
Scenario 3: Interest-Only Private → Amortizing CMHC
You need to preserve cash flow during stabilization. Get a private interest-only loan (you pay only interest, no principal) for 18 months. Interest-only payments are 25-30% lower than amortizing payments. Once stable, refinance to CMHC amortizing mortgage.
Example: $2 million private loan, interest-only at 8.5% = $14,167/month interest. Same $2 million amortized over 7 years at 8.5% = $32,100/month. 18-month savings: $324,000 in negative cash flow avoided.
FAQ: Private Lending vs CMHC for Apartment Buildings
What interest rate should I expect from a private lender for an apartment building?
Can I refinance a private apartment mortgage to CMHC after stabilization?
What does CMHC require to finance an apartment building?
Which is faster — private lending or CMHC?
What are the main advantages of CMHC for apartment buildings?
What are the main advantages of private lending for apartment buildings?
How do I know if a property qualifies for CMHC?
What's the "private bridge to CMHC" strategy and when should I use it?
What DSCR does CMHC require for apartment buildings?
Should I use CMHC or private lending for a new apartment development?
What happens if I can't refinance a private apartment mortgage to CMHC?
The Decision Framework: Private vs CMHC
Choose CMHC if:
- Property is already stabilized (85%+ occupancy, DSCR 1.20x+)
- You have 5+ months timeline
- You want the lowest possible interest rate
- You’re optimizing for long-term cash flow
- The property meets all CMHC standards (no significant deferred maintenance)
- You have time for full underwriting
Choose Private Lending if:
- Property needs stabilization or value-add work
- You need to close in 30 days or less
- DSCR is below CMHC thresholds
- There’s deferred maintenance that needs addressing
- You’re buying below market and improving
- You plan to refinance to CMHC within 18-24 months
- You need flexibility on terms and documentation
Use Hybrid Financing if:
- Property partially qualifies for CMHC but you need more leverage
- You’re developing new units
- You need interest-only payments during stabilization
- You want first mortgage CMHC rates + second mortgage private fill
Real Talk: The Total Cost of Each Path
Private lending costs you $432,000 in interest on a 15-unit building over 18 months.
But that private loan unlocked a deal generating $8,000/month positive cash flow that wouldn’t have happened with CMHC alone. Over 40 years, that’s $3.84 million in excess cash flow.
The private loan is expensive. But it’s an investment in deal access, not a permanent financing choice.
CMHC costs less per month but requires the property to already be stabilized. If you’re buying value-add deals — which is where returns come from — CMHC often isn’t an option on day one.
The sophisticated play is: use private to buy and stabilize. Use CMHC to hold and cash flow.
Resources for Apartment Building Financing
Looking for more details on CMHC programs? Check out our guides:
- CMHC MLI Select for Multifamily Investing
- CMHC MLI Standard: Multi-Unit Mortgage Insurance Guide
- Private Lending in Canada: Best Rates and Strategies
- How to Finance Multifamily Properties in Canada
- Use our CMHC MLI Max Loan Calculator to model financing scenarios
Final Thought
Private lending and CMHC aren’t competitors — they’re partners in a successful multifamily investment strategy.
Private lending gets you into deals early, during the highest-potential phase. CMHC locks in long-term rates once the deal is proven. The investors building substantial apartment portfolios are using both, sequentially, over and over.
If you’re trying to decide which path is right for your next deal, book a strategy call. We’ll walk through your specific property, your timeline, and your goals — and identify whether private, CMHC, or a hybrid approach makes the most sense.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Consult a licensed mortgage professional before making any financing decisions.
Written by
LendCity
Published
February 26, 2026
Reading time
14 min read
CMHC Insurance
Mortgage default insurance from Canada Mortgage and Housing Corporation. For 1-4 unit investment properties, investors must put 20%+ down (no insurance available). However, CMHC offers MLI Select for 5+ unit multifamily properties, and house hackers can access insured mortgages with 5-10% down.
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.
LTV
Loan-to-Value ratio - the mortgage amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower). An 80% LTV means you're borrowing 80% and putting 20% down. Lower LTV generally means better rates and terms.
DSCR
Debt Service Coverage Ratio - a metric that compares a property's net operating income to its mortgage payments. A DSCR of 1.25 means the property generates 25% more income than needed to cover the debt. Lenders typically require a minimum DSCR of 1.0 to 1.25 for investment property loans.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
Multifamily
Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.
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.
Mortgage Insurance Premium
The fee charged by CMHC or other insurers for mortgage default insurance on high-ratio mortgages. The premium is calculated as a percentage of the loan amount and can be added to the mortgage balance or paid upfront.
Recourse Loan
A loan where the borrower is personally liable for repayment beyond the collateral value. If the property sells for less than owed at foreclosure, the lender can pursue the borrower's other assets. Most Canadian commercial mortgages under $5 million are full recourse.
Hover over terms to see definitions. View the full glossary for all terms.