Ontario Private Mortgages: Rules, Costs and How They Work
Ontario has the most active private mortgage market in Canada, and the most specific rules around it. Private lending here runs through brokerages licensed by the Financial Services Regulatory Authority of Ontario (FSRA), and defaults are enforced by power of sale — usually faster than the court-supervised foreclosure used in British Columbia and Alberta. Here's what that means for an Ontario homeowner considering a private first or second mortgage.
Key takeaways
- Private mortgages in Ontario are arranged through brokerages and agents licensed by FSRA under the Mortgage Brokerages, Lenders and Administrators Act, 2006.
- Typical 2026 pricing: private firsts about 7% to 11%, private seconds about 10% to 15%, plus lender fees.
- Ontario lenders usually enforce by power of sale: notice can be given after 15 days of default, with at least 35 days to pay before a sale.
- FSRA's own guidance: a private mortgage should be a short-term solution with a realistic exit.
What is a private mortgage in Ontario?
A private mortgage is a loan secured on your home by a non-bank lender — a mortgage investment corporation (MIC), a private lending company or an individual investor. In Ontario, the people who arrange these loans and the companies that service them must hold FSRA licences as mortgage agents, brokers, brokerages or administrators. Those licensees owe you written disclosure of the loan's cost, fees and risks before you commit.
Ontario homeowners use private mortgages to consolidate debt, pay property tax or CRA arrears, stop a power of sale, buy before selling, or borrow when self-employed income doesn't fit bank rules. See our private mortgage page for how Lendmax arranges them.
What is a second mortgage?
A second mortgage is registered on title behind your existing first. In Ontario's high-value markets it's often the cheapest way to borrow privately, because your low-rate first mortgage stays in place and only the new money is priced at private rates. Example: a $1,000,000 home with a $520,000 first mortgage. At a 75% combined limit, up to $230,000 could be borrowed in a second; a $130,000 second would bring combined loan-to-value to 65%.
Why are private mortgage positions important in Ontario?
Under power of sale, sale proceeds pay costs and any property tax arrears, then the first mortgage in full, then the second, then the third. A second lender only recovers what's left, so it lends less and charges more. Ontario's relatively quick enforcement gives private lenders some confidence — but it also means a borrower who falls behind can lose control of the sale quickly. Know your contract's default terms before you sign.
Who lends private mortgages in Ontario?
- MICs — pooled funds under section 130.1 of the Income Tax Act; many are Ontario-based.
- Private lending companies and syndicates, usually serviced by an FSRA-licensed mortgage administrator.
- Individual investors, who in Ontario generally lend through a licensed brokerage that provides them with their own investor disclosure.
How does the payment work on Ontario private mortgages?
Interest-only, monthly, with fees taken from the advance. For the $130,000 second mortgage above at 11.49%, compounded semi-annually:
| Item | Amount |
|---|---|
| Monthly interest-only payment | $1,215.96 |
| Interest over 12 months | about $14,592 |
| Lender fee (3%) | $3,900 |
| Broker fee, where one applies (1%) | $1,300 |
| Legal and appraisal (estimate) | about $2,100 |
| Effective first-year cost | about 17.8% of the net funds |
The federal criminal interest rate — 35% APR for loans to individuals since January 1, 2025 — caps the total of interest and fees. The Interest Act also prevents a lender from charging a higher rate on arrears than on the rest of the loan.
What's the term of an Ontario private mortgage?
Typically 12 months, sometimes 6 or 24. FSRA notes that private mortgages often last one or two years, after which the borrower needs to qualify for lower-cost financing. Some contracts defer payments and add interest to the balance — read the terms carefully if you're offered that structure.
What are the criteria to get approved for a private mortgage in Ontario?
- Loan-to-value: about 75% to 80% on a first, about 75% combined on a second in the GTA and other strong markets; about 65% for condos and smaller towns.
- Property: marketability matters — urban detached and semi-detached homes get the best terms; rural, cottage and specialty properties are stricter.
- Appraisal, title search and property tax status.
- A way to make the payments and a realistic exit.
There's no federal stress test, and the lender sets its own credit standards.
Why are Ontario private mortgage rates higher than traditional mortgages?
The lender is using investor money, can't insure the loan, takes borrowers the banks declined, and has a short term to earn its return. Second-position loans add the risk of being paid after the first mortgage. The result in 2026 is a private market several percentage points above bank rates — which is why the exit plan matters as much as the approval.
What are the pros and cons of private mortgages in Ontario?
| Pros | Cons |
|---|---|
| Deep market of MICs and private lenders, especially in the GTA | Higher rates and fees than bank mortgages |
| FSRA-licensed brokerages must disclose costs in writing | Power of sale can move quickly after a default |
| Fast approvals based on equity | Short terms with renewal fees |
| Can stop a power of sale or tax arrears | Interest-only — no principal paid down |
Sources
This article is general information, not financial or legal advice. Enforcement timelines depend on your mortgage contract and the law; get independent legal advice. Rate and fee ranges are typical of 2026 and vary by lender. Mortgage financing is subject to lender approval.
Frequently asked questions
Under a mortgage with a power of sale clause, the lender can give notice once the default has lasted at least 15 days, and must give at least 35 days' notice before selling. Contact your lender and get legal advice as soon as a payment is missed.
Yes. A lawyer registers the mortgage, searches title and explains the documents. Independent legal advice protects you.
Search FSRA's public licensee register for the agent or broker and the brokerage before you share documents.
The Interest Act prohibits charging a higher rate on arrears than on the rest of the loan. Reasonable administration fees may still apply under your contract.
Ontario homeowner considering a private mortgage?
We'll compare Ontario MICs and private lenders, show every fee in writing, and plan the refinance back to a bank.