Private Mortgages in British Columbia
Short-term mortgage financing for situations that may not fit traditional bank guidelines.
A private mortgage can provide a solution when timing, credit, income documentation, property type or another issue prevents conventional approval. The key is to understand the complete cost and establish a realistic exit strategy before proceeding.
What Is a Private Mortgage?
A private mortgage is financing provided by an individual, mortgage investment corporation or other private lender rather than a traditional bank or credit union.
Private lenders generally place greater emphasis on the property, available equity, loan amount and repayment plan. Income and credit still matter, but the approval process may be more flexible than with a conventional lender.
These mortgages are usually intended as temporary financing rather than a permanent long-term solution.
When a Private Mortgage May Make Sense
Time-Sensitive FinancingA purchase, payout, tax deadline, foreclosure concern or other urgent situation may require funding faster than a traditional lender can provide. |
Income or Credit ChallengesSelf-employment, recent income changes, damaged credit or difficult-to-document income may prevent approval with a conventional lender. |
Unusual PropertiesA rural, mixed-use, unfinished, unique or otherwise non-standard property may fall outside a bank’s normal lending guidelines. |
Common Uses for Private Financing
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✓ Purchase financing when a bank declines ✓ Short-term bridge financing ✓ Paying out mortgage arrears or tax arrears ✓ Preventing a forced sale or foreclosure |
✓ Completing construction or renovations ✓ Consolidating urgent debts ✓ Financing a difficult property ✓ Creating time to improve credit or income |
First and Second Private Mortgages
Private First MortgageA first mortgage has priority on title ahead of other mortgages. It may be used to purchase a property, refinance an existing lender or provide a larger short-term financing solution. |
Private Second MortgageA second mortgage is registered behind an existing first mortgage. It may provide access to equity without replacing the current first mortgage, although rates and fees may be higher because the lender accepts greater risk. |
What Private Lenders Review
Private lenders do not all use the same criteria. Each lender will review the complete risk and determine whether the loan fits its investment guidelines.
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✓ Property value and marketability ✓ Loan amount and loan-to-value ✓ Property type, condition and location ✓ Priority of the mortgage on title |
✓ Borrower income and credit history ✓ Purpose of the loan ✓ Ability to carry the payments ✓ Strength of the exit strategy |
Why Loan-to-Value Matters
Available EquityThe lender compares the proposed mortgage and any existing secured debt with the property’s confirmed value. Lower loan-to-value generally means less risk to the lender. |
Net Usable ProceedsThe gross mortgage amount is reduced by existing payouts, interest adjustments, lender fees, legal costs, appraisal costs and other applicable expenses. |
Understand the Complete Cost
Private financing usually costs more than a conventional mortgage. The decision should be based on the entire transaction, not only the interest rate.
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✓ Interest rate ✓ Lender fee ✓ Brokerage fee, if applicable ✓ Legal or notary fees |
✓ Appraisal cost ✓ Existing mortgage payout costs ✓ Renewal or extension fees ✓ Prepayment or discharge charges |
Doug will show you the expected net proceeds, monthly payment, total fees and estimated cost before you decide whether to proceed.
The Exit Strategy Comes First
A private mortgage should normally solve a temporary problem while creating enough time to reach a more sustainable solution.
Before arranging the loan, Doug will help identify how and when the private mortgage is expected to be repaid.
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✓ Refinance with a bank or credit union ✓ Improve credit and income documentation ✓ Complete construction or renovations |
✓ Sell the property ✓ Receive funds from another planned source ✓ Pay down debt and improve qualification |
Questions to Ask Before Proceeding
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What problem does this mortgage solve? The financing should have a clear purpose and create a measurable improvement in the borrower’s situation. |
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How long will the mortgage be needed? A realistic timeline helps determine the appropriate term and reduces the risk of costly extensions. |
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Can the payments be comfortably carried? The borrower must be able to manage the required payments, property taxes, insurance and other obligations. |
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What happens if the exit is delayed? Review extension options, renewal fees, default costs and the consequences if the planned repayment does not happen on time. |
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Are there less expensive alternatives? A conventional refinance, second mortgage, home equity line of credit, sale or other strategy may be more suitable. |
Important Considerations
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✓ Rates and fees may be significantly higher ✓ Terms are often shorter ✓ Extensions may be expensive |
✓ Default can place the property at risk ✓ Legal advice is normally required ✓ The exit plan must be realistic |
Why Arrange Private Financing With Doug?
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✓ More than 35 years of mortgage experience ✓ Access to a range of private lenders ✓ Clear comparison of rates, fees and net proceeds |
✓ Careful review of the exit strategy ✓ Help with difficult and urgent situations ✓ Serving borrowers throughout British Columbia |
Let’s Build the Exit Strategy First
Tell Doug what has happened, what needs to be accomplished and how you expect the private mortgage to be repaid. He will review the options, costs and risks before recommending a path forward.
Call Doug: 604-820-4570
Private Mortgage Financing in Mission and Throughout British Columbia
Doug Lifford Mortgage Services helps borrowers in Mission, Abbotsford, Chilliwack, Maple Ridge and communities throughout British Columbia review private first mortgages, private second mortgages, short-term bridge financing, equity lending and alternative mortgage solutions.
Private mortgage rates, fees, loan-to-value limits, qualification requirements and lender policies vary. This page provides general information only. Obtain personalized mortgage, legal, accounting and tax advice before proceeding.