Individual Private Mortgage Lenders

An individual private mortgage is funded directly by a person or small group rather than a bank or pooled MIC. The mortgage can still be registered on title, enforced according to its contract and Ontario law, administered professionally and arranged through a licensed mortgage brokerage.

FSRA notes that private mortgage lenders can include an individual or even a friend. The personal source of the capital does not reduce the need to understand the written mortgage terms, risks and costs.

An individual lender may decide that a particular property, borrower story or exit is attractive even when it falls outside a larger lender’s standard program. That can be helpful for unusual properties, urgent timelines, temporary income problems or a narrowly defined bridge.

The other side of that flexibility is concentration. Because the lender’s own capital may be committed to only a small number of mortgages, a decision can depend heavily on the lender’s personal liquidity, target return, risk tolerance and timing.

Borrowers should know the legal identity of the lender before closing and should understand who is administering the mortgage after closing. The person who supplied the money may use a mortgage administrator, brokerage or lawyer for payments, statements and enforcement communications.

That distinction matters at maturity. The person collecting payments may not have authority to approve a renewal, and the investor may need the capital back for reasons unrelated to the borrower’s payment history.

Even a highly flexible lender needs to know what stands behind the loan. Accepted property value, location, condition, legal use, marketability, first or second position and existing claims determine how much cushion exists if the mortgage is not repaid as planned.

A lower LTV can make a transaction more attractive, but the same percentage can represent very different risk on a standard GTA house versus a remote, unique or incomplete property. Borrowable equity is therefore a lender conclusion, not simply property value minus existing mortgages.

An individual private lender may not apply the same standardized income formula as a bank, especially where there is substantial equity and a clear exit. But the lender may still request evidence that monthly interest, property taxes, insurance and other obligations can be maintained.

A transaction can also rely more heavily on an asset sale or another defined repayment source than on ongoing employment income. That does not make the mortgage “no income required”; it changes what evidence is relevant to repayment.

An individual can lend in first or subordinate position. A first-position lender is generally ahead of later mortgages, while a second-position lender must evaluate every amount that can rank ahead of it. That includes the first-mortgage balance and may also include arrears, interest, legal costs, taxes or other priority claims depending on the facts and law.

A borrower may therefore find that an individual lender is comfortable with a first mortgage at an LTV that the same investor would not accept in second position at the same combined LTV.

Individual private mortgages can include a lender fee, brokerage fee, appraisal and separate legal costs in addition to interest. The lender may also require prepaid interest, an interest reserve or particular payout terms.

Because pricing is transaction-specific, borrowers should not infer a “market rate” from one previous transaction. Compare the complete dollars over the actual term and the amount of equity that remains after the planned exit.

A borrower who makes every payment can still face a non-renewal if the individual lender needs the money returned. This is one of the most important differences between a direct private investor and a large institution with broad ongoing funding capacity.

The safest assumption is that the mortgage must be paid out by maturity. If renewal is available, it can be evaluated as a new option rather than treated as an entitlement.

If a borrower uses a mortgage professional to arrange private financing in Ontario, the licensing rules matter. FSRA’s consumer guidance explains that a Level 2 mortgage agent or mortgage broker is permitted to arrange financing from private lenders, whereas Level 1 agents are limited to specified lender categories.

A borrower should verify the mortgage professional’s licence and should expect written disclosure of material risks, applicable fees, relationships and conflicts as required by the regulatory framework.

Individual private money can work well when the transaction is unusual but understandable: a short closing deadline, a second mortgage behind a valuable first, a temporary credit or income issue, a bridge to a documented asset sale, or a property that a larger private lender does not serve.

It is a poor substitute for a long-term affordability solution. If the borrower’s only plan is to ask the same individual lender for another year, the financing remains exposed to both borrower risk and the lender’s willingness and ability to continue.

A borrower should be cautious if asked to sign incomplete documents, send fees to an individual agent, conceal another mortgage, misstate income or occupancy, or rely on an oral promise that contradicts the written commitment. Mortgage fraud and misrepresentation risks do not disappear in private lending.

Where the lender or arrangement is outside a licensed brokerage, the borrower should be especially careful about what regulatory protections apply and should obtain independent legal advice before assuming an exemption or informal relationship makes the transaction safe.