Direct answer
Your exit strategy is the plan for making the private mortgage temporary in reality
A good exit strategy identifies the current financing problem, the specific change that will solve it, the evidence that will prove the change, the target date, the amount that must be repaid and a fallback if the first plan fails.
It is the plan for repaying or replacing the private mortgage
Private mortgages are usually short-term. An exit strategy explains how the borrower expects to pay out the private lender at or before maturity—through an institutional refinance, property sale, asset proceeds, construction completion or another realistic repayment source.
FSRA’s 2026 guidance states that a realistic exit strategy is necessary for a private mortgage to be considered suitable.
A good exit identifies a measurable change
A strong exit sounds like: “The borrower returns from temporary layoff in September, completes six months of employment history by March, and the private second matures in May when the first mortgage can also be refinanced.”
A weak exit sounds like: “The borrower should qualify next year.” The first statement identifies the obstacle, change, evidence and timing. The second predicts an outcome without explaining why it should occur.
Common exit routes
Common exits include refinancing to an A or B lender after income or credit improves, selling the property, selling another asset, receiving documented business or legal proceeds, completing construction so the property becomes conventionally financeable, or paying down the mortgage with accumulated cash.
The exit should use the expected maturity balance and realistic transaction costs. A plan that can repay only the original cash advanced but not fees and financed amounts is incomplete.
Hope is not an exit strategy
“Rates will fall,” “the house will go up,” “the lender will renew,” and “my income should improve” are all possible future events, but none is a complete exit on its own. FSRA specifically warns against relying on speculative property appreciation.
A credible plan can include uncertainty, but it needs evidence and a fallback rather than treating the most optimistic scenario as guaranteed.
The backup plan matters because private capital can disappear at maturity
Even a good refinance plan can fail because of a lower appraisal, job loss or policy change. A fallback might be a different lender category, a short negotiated extension, sale, additional cash or another legally and financially suitable option.
Another automatic renewal with the same private lender is not a reliable fallback because the lender may need the capital returned or may choose not to renew.
The simplest exit test
Ask: What prevents lower-cost financing today? What exactly will be different by maturity? What document or event will prove that difference? What balance must be repaid? What happens if the change is late or does not occur?
If those questions cannot be answered with credible facts, the proposed private mortgage may be financing time rather than financing a solution.
Evidence and factual governance
Sources and verification
This knowledge resource is governed by the primary or authoritative sources below. Sources were last checked on August 14, 2026. Product availability, lender policy and individual legal or tax consequences must still be confirmed for the actual transaction.