First Mortgage in Toronto: Private First Mortgages Explained
A private first mortgage becomes the main loan on your Toronto property when a bank can't help — to pay out a lender that won't renew, stop a power of sale, or close a purchase while your income or credit is being sorted out. It's the lowest-cost form of private lending, but its rate applies to your whole balance. Here's how it works in Toronto and what to budget.
Key takeaways
- A private first mortgage takes first position on title — the senior loan, paid first from any sale.
- Typical 2026 pricing is about 7% to 11% interest-only, with a lender fee of about 1% to 3%.
- Lenders commonly go to 75% to 80% of value on Toronto houses, and around 65% on condos.
- Toronto purchases carry both the Ontario and the Toronto municipal land transfer tax — budget for both on top of your down payment.
What is a private mortgage?
A private mortgage is a loan on your home from a non-bank lender: a mortgage investment corporation, a private lending company or an individual investor. Private lenders approve mainly on equity and the property, not on bank debt ratios or the stress test. In Ontario they reach borrowers through FSRA-licensed brokerages, which must give you a written disclosure of the cost of borrowing.
What is a second mortgage — and how is a first different?
A second mortgage sits behind an existing first and adds new money. A first mortgage is the senior loan — it's either the mortgage that financed your purchase or the one that paid off your previous lender. Because it's paid first, a private first costs less than a private second. But it applies its rate to your entire balance, so if your current mortgage has a low rate and time left, a second mortgage on the new money may cost less overall.
Why are private mortgage positions important?
Under Ontario power of sale, sale proceeds go to costs and property tax arrears, then the first mortgage, then later charges. That priority is what lets a first-position private lender offer lower rates and higher loan-to-value. It also means a private first lender controls what comes next: it may permit a second mortgage behind it, or prohibit one.
Who lends private first mortgages in Toronto?
- MICs, which often offer the sharpest private first-mortgage pricing on well-located Toronto houses.
- Private lending companies — useful for unusual properties or tight deadlines.
- Individual or syndicated investors, through a licensed brokerage.
How does the payment work on a Toronto private first mortgage?
Interest-only, monthly. Example: a $680,000 Toronto condo with a $442,000 private first mortgage (65% loan-to-value) at 8.99%, compounded semi-annually:
| Item | Amount |
|---|---|
| Monthly interest-only payment | $3,250.95 |
| Interest over 12 months | about $39,011 |
| Lender fee (2%) | $8,840 |
| Broker fee, where one applies (1%) | $4,420 |
| Legal and appraisal (estimate) | about $2,100 |
| Effective first-year cost | about 12.7% of the net funds |
Condo fees and property tax are on top of the mortgage payment, and lenders will check that both are current.
What's the term of a private first mortgage?
Typically 12 months. Use it to do whatever gets you back to a bank or B lender: two years of self-employed tax returns, a discharged consumer proposal, a sale. Check when the mortgage becomes open and the prepayment charge, so an early exit doesn't cost more than it should.
What are the criteria to get approved for a private first mortgage in Toronto?
- Loan-to-value up to about 75% to 80% on houses, around 65% on condos.
- A full appraisal; for condos, the building's status certificate and reserve fund.
- For purchases, a down payment of at least 20% to 35%, plus closing costs including both land transfer taxes.
- Evidence the payment can be made — bank statements, business deposits, rent or a prepaid reserve.
- A clear exit plan.
Why are private first mortgage rates higher than traditional mortgages?
Private lenders use investor capital, can't insure their loans, lend to borrowers banks have declined and recover their costs over a short term. Even in first position on a Toronto property, that puts private rates several points above bank rates.
What are the pros and cons of a private first mortgage in Toronto?
| Pros | Cons |
|---|---|
| Lowest-cost private option — first position | Rate applies to your entire balance |
| Can pay out a lender that won't renew | New lender fee, legal and appraisal |
| Fast purchase closings when banks can't approve in time | Toronto purchases carry two land transfer taxes |
| Strong lender appetite for Toronto houses | Lower limits for condos |
Sources
This article is general information, not financial or legal advice. Rate and fee ranges are typical of the private market in 2026 and vary by lender, property and file. Examples are illustrative and rounded, not market averages. Mortgage financing is subject to lender approval.
Frequently asked questions
Yes, with a larger down payment than a bank requires — typically at least 20% to 35% — and enough cash for closing costs, including both land transfer taxes.
Toronto charges its own land transfer tax on purchases in the city, in addition to Ontario's. First-time buyers may qualify for rebates on both.
Often within a week once the appraisal and lawyer are arranged — fast enough to meet most purchase closings and renewal deadlines.
By refinancing to a bank or B lender once you qualify, or by selling. Plan it from day one.
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