How Do Private Mortgage Lenders Work?

March 1, 2022

Key points:

  • Many Canadians need to turn to private mortgage lenders due to the strict lending standards of traditional banks
  • The 5 Cs of credit will influence your mortgage: Capacity, Credit, Capital, Collateral, and Character

Welcome to the world of private mortgages

Today, we’re introducing you to the world of private mortgage lending. Private mortgages are options for many Canadian borrowers who need some more flexibility. Here, we discuss what private mortgage lenders do, who they are, and what they focus on for your application.

You can also review the complete private mortgage guide for more detailed information!

Don’t feel like watching? Find the full transcript below!

Chris: [00:00:00] Mortgage lenders in Canada are notoriously picky. There is a box; if you land inside the box, you’re in great shape. If you are outside of that box, then you may have challenges securing mortgage financing, either to purchase properties or to kind of get your life back on track. In this video, I’m going to talk to you about exactly what a private mortgage lender does and the solutions that they provide. Come along with me.

The 5 Cs of credit

Chris: [00:00:44] So first off, let’s define exactly what a private mortgage lender does. You have to understand the core of a credit application. There are what we call the five Cs of credit, and those five Cs are your Capacity – ok, that’s your income – your Credit, which is your credit history, we look at the credit bureau, Capital, which is the amount of assets or money that you have available, either for a down payment or in the equity of your home, the Collateral, which is the home that you currently own and the loan is secured against, and the fifth C is Character. So looking at the overall story to understand what has happened to get you to this point. Your bank and other A lenders are really looking for the creme de la creme when it comes to the five Cs of credit. They have a very low risk tolerance, and just because you don’t fit within the parameters of the bank’s lending criteria doesn’t mean that you cannot get a mortgage. As the complexity of your situation gets more and more complex, there are lenders that will have various types of appetite, and in general, we deem them to be B lenders and C lenders, where C lenders are at the far reaches and most flexible in terms of how they approach your credit application.

Who are private mortgage lenders?

Chris: [00:02:15] This group of C lenders, sometimes known as private home equity lenders or private mortgage lenders, are different. They are not necessarily institutions. They could be corporations or groups of individuals or even individuals that are looking to invest their money. From their point of view, it’s an investment in you where they see an opportunity, they see that you are worthy of the credit. It’s higher risk, and so they will expect a higher interest rate. But it does allow you the opportunity to access relatively cheap money, certainly cheaper than credit card debt, and allow you to move forward and rebuild your life or rebuild your finances if something very specific has happened to you.

Chris: [00:03:07] So when we approach a C lender or private home equity mortgage lender, they will also consider the five Cs. But they start putting more emphasis on the collateral, which is the property itself, how much equity you have in it, and the fifth C, which is character. What is the overall story that got you to this point? And how are we going to move you forward and help you get away from a private mortgage and back onto the mainstream? We’ll talk about that in future videos.

Chris: [00:03:43] My name is Chris Molder. I am a Toronto mortgage broker. For the last two decades, I’ve been helping borrowers navigate the world of private mortgages. If you are shopping for a private home equity loan or have any questions, please feel free to reach out with confidence. I’m just a phone call or an email away. Bye for now.

Need more help or information?

I encourage you to check out the complete private mortgage guide on my website, where I cover all aspects of this type of mortgage financing. 

I can help you determine if private mortgage financing is right for you. I’m just a phone call or email away. You can book a call directly into my calendar below, or get in touch with me here.


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.