Quick, plain-English answers to the questions people ask most about private mortgages in Alberta. For anything specific to your situation, a licensed broker can give you a proper answer.
What is a private mortgage?
A mortgage from a private lender, such as a mortgage investment corporation, a group of investors or an individual, instead of a bank or credit union. It’s secured against your property and registered at Alberta Land Titles.
Do I need good credit?
Not necessarily. Private lenders focus mainly on your home’s equity and your plan to repay. Many approve borrowers with low credit scores or past problems.
How much can I borrow?
It depends mostly on your home’s value and how much you already owe against it. Private lenders cap the total of all mortgages at a percentage of the home’s value, and that cap varies by lender, property type and location. A broker can tell you what’s realistic after looking at your property.
Why are the rates higher than a bank’s?
Private lenders take on situations banks won’t, they lend for shorter terms, and their money comes from investors who expect a higher return. You’re paying for flexibility and speed.
What fees should I expect?
Usually a lender fee, often a broker fee, plus an appraisal and legal fees. Fees are often taken from the mortgage funds at closing. Ask for a full written breakdown before you commit.
Are payments interest-only?
Often, yes. Interest-only payments keep the monthly cost lower, but the balance doesn’t go down. That’s why the exit plan matters.
How long is the term?
Commonly one year, sometimes shorter or longer. At the end you either renew (usually with another fee), refinance with another lender, or sell.
How fast can it close?
Often much faster than a bank, sometimes within days once the appraisal and documents are ready. Your lawyer’s schedule and the lender’s conditions affect the timing.
Can I get a private second mortgage and keep my current one?
Yes, if there’s enough equity. A second mortgage sits behind your existing mortgage, so you keep your current rate on the first. Second mortgages generally cost more than firsts.
Can I pay it off early?
It depends on the terms. Some private mortgages are open (no penalty), some require a few months’ interest or notice, and some are closed for an initial period. Check before you sign.
What happens if I miss a payment?
Read your documents carefully: private mortgages can include fees and default terms that apply quickly. If you think you’ll miss a payment, talk to your broker or lender right away. Options are usually better before a missed payment than after.
Do I need a lawyer?
Yes. In Alberta a lawyer handles the mortgage documents and registration, and should explain the terms to you before you sign. Use your own lawyer, not the lender’s.
How do I get out of a private mortgage?
Most borrowers refinance with an alternative lender or bank once their situation improves, or sell the property. Plan this before you start, and check in with your broker a few months before the term ends.
Do I have to use a broker?
No, but a broker can compare several private lenders, explain the terms, and tell you if a cheaper type of lender might approve you instead.
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.