A private mortgage is a loan secured by your home, with the money coming from a private lender instead of a bank or credit union. If you’ve been turned down by a bank, need money quickly, or have a situation that doesn’t fit the usual boxes, it’s one of the options a mortgage broker may raise. This guide explains what it is, how it works in Alberta, and what to watch for.

Who are private lenders?

“Private lender” covers a few different kinds of lenders:

  • Mortgage investment corporations (MICs): companies that pool money from many investors and lend it out as mortgages. They’re the most common private lenders in Alberta.
  • Syndicates: groups of investors who fund a single mortgage together.
  • Individual lenders: people who lend their own money, often arranged through a broker.

None of these are federally regulated banks, so they don’t follow the same lending rules banks do, including the federal mortgage “stress test.” That’s where their flexibility comes from.

How a private mortgage differs from a bank mortgage

A bank decides mostly on you: your credit score, your provable income and your debt ratios. A private lender decides mostly on the property: how much equity you have, what the home is worth, and how easily it could be sold. Private lenders still look at your situation, but the questions they care about most are “How much equity is there?” and “How will this loan be paid back?”

Other common differences:

  • Shorter terms. Private mortgages usually run for months or a year or two, not five years.
  • Interest-only payments. Many private mortgages only require interest each month, which keeps payments lower but doesn’t pay down the balance.
  • Fees. Expect a lender fee and often a broker fee, on top of legal and appraisal costs. Banks rarely charge these.
  • Higher interest rates. You’re paying for flexibility and speed, so the rate is higher than a bank’s.
  • Speed. A private mortgage can often close much faster than a bank mortgage, which matters when there’s a deadline.

What a private mortgage is used for

People in Alberta use private mortgages to:

  • Buy a home when a bank won’t approve them yet
  • Consolidate high-interest debt into one payment
  • Catch up on mortgage or property tax arrears
  • Pay off a CRA debt
  • Bridge the gap between buying a new home and selling the old one
  • Borrow against a property a bank doesn’t like, such as some acreages or rural homes

First or second mortgage?

A private mortgage can be a first mortgage, replacing your existing mortgage entirely, or a second mortgage that sits behind your current one. A second mortgage lets you keep your existing mortgage and its rate, but it usually costs more than a first, because the second lender only gets paid after the first if the home is ever sold.

The most important question: what’s your exit?

A private mortgage works best as a bridge, not a destination. Before you sign, you should know how you’ll get out of it. For example:

  • Rebuild your credit for a year, then refinance with a bank or alternative lender
  • Wait for a consumer proposal to be completed
  • Build up two years of self-employed income on your tax returns
  • Sell the property or another asset

If there’s no realistic exit, a private mortgage can turn into a cycle of renewals and fees. A good broker will talk about the exit before you apply.

Is a private mortgage safe?

A private mortgage is a legitimate, legal way to borrow, and in Alberta it’s registered at Land Titles just like any other mortgage. The risks come from the terms, not the idea. Read every condition, understand the fees and what happens if you miss a payment, and have your own lawyer review the documents before you sign. Working through a licensed mortgage broker means someone is comparing lenders on your behalf and explaining the terms in plain language.

Next step

If a bank has said no, or you’re not sure what your options are, a licensed broker can review your situation and tell you honestly whether a private mortgage makes sense, or whether there’s a better, cheaper option.

This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.