What Is a Private Mortgage? Ask a S.o.b

December 11, 2009


This week’s question is in regards to the various post we have online regarding Private Mortgages in Toronto.

What is a private mortgage?

Private mortgages are a special and very interesting type of mortgage option that most people are not too familiar with. The most basic definition of a private mortgage is a mortgage contract in which the lender is not a registered financial institution but may be a friend, family member or individual investor.

Because banks and other financial institutions have strict guidelines for lending that limit their ability to finance certain scenarios and borrower profiles, private mortgages are used to meet those unique needs. Some typical situations where a borrower may need private financing include:

-Financing for a cottage or unique property

-Financing for renovation projects and construction

-Financing for an individual who can’t prove their income by conventional means

-Financing to consolidate debt or recover from a bankruptcy

-Financing for individuals who have income tax or property tax arrears

There are several benefits to the borrower and investor alike in this type of mortgage arrangement.

From the borrowers point of view, private mortgages can be an excellent alternative when a suitable bank mortgage is impossible to obtain. Reasons why a borrower may require a private mortgage include; need for a second mortgage, poor credit, income tax arrears, tax arrears, construction financing, financing on properties that institutional banks may not consider prime, cases where an individual has recently gone bankrupt or just can’t prove their income. A private mortgage should never be a long term strategy for a borrower, as the interest rates tend to be higher and do not always have the features and flexibility that institutional mortgages offer.

Anybody can lend money through a mortgage. You don’t have to be a bank to lend money, it is possible for anyone to offer a private mortgage so long as it is arranged through a licensed mortgage broker in Ontario. Private mortgages are a great investment vehicle which provides monthly income. In addition, mortgages are negotiable instruments which can be assumed, renegotiated, and transferred as needed. All the while the investor is protected by the security of the real estate on which the mortgage is registered.

Regardless of whether you are a borrower or an investor a knowledgeable mortgage broker who is specialized in private mortgages is necessary in order to arrange the mortgage and also provide the guidance needed to make informed decisions. If you would like to connect with a real expert in the area call the father of the S.O.B,  Arnold Molder at 416.461.0204 ext 1. He has been arranging and managing private mortgages for the past 30 years!

DISCLAIMER: please note the purpose of this post is to inform. I am in no way offering investment advise, please consult with your investment adviser.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.