Private lending Ontario gives you an alternative to banks when you need faster access to funds or when traditional approval paths won’t work. If you need short-term financing, flexible underwriting, or quicker closings, private lenders can often provide those solutions faster than banks—though at higher rates and with different risk profiles.
This article explains how private lending works in Ontario, what to expect during the application and closing process, and how regulations shape lender and borrower responsibilities. Use the guidance here to decide whether private lending suits your situation and to navigate the key steps with confidence.
Understanding Private Lending in Ontario
Private lending in Ontario offers short-term, asset-backed financing outside banks, typically at higher interest but with faster funding and flexible eligibility. You’ll deal mainly with individual investors, mortgage investment corporations, or private firms, and loans are commonly secured by real property and governed by provincial mortgage law.
What Is Private Lending?
Private lending means a non-bank lender provides a mortgage or loan secured by your real estate or other assets. You’ll find borrowers use these loans for bridge financing, renovation projects, purchases when bank approval is slow or denied, or to refinance quickly.
Lenders price risk with higher interest rates and fees, and they rely on property value and equity rather than only credit scores. Legal documentation—mortgage, promissory note, and often a power of sale or assignment—creates enforceable security under Ontario law.
Types of Private Lenders
You’ll encounter several lender types: individual private investors lending personal funds, Mortgage Investment Corporations (MICs) pooling investor capital, and private lending firms or mortgage brokers arranging capital from syndicates. Each type has different underwriting, speed, and reporting standards.
Individual investors may offer flexibility but limited capital. MICs provide regulated pooling, more predictable capacity, and professional management. Private firms can structure larger or more complex loans but charge origination and servicing fees.
Common Loan Structures and Terms
Private loans in Ontario are typically short-term (3–24 months) and secured by a first or second mortgage on the property. Expect interest rates commonly ranging from mid-single digits above prime to double digits, plus origination fees (1–5% of loan), and sometimes lender legal costs.
Key terms to watch:
- Loan-to-Value (LTV): often 60–75% for first mortgages, lower for second charges.
- Interest payment: monthly, interest-only, or rolled into the principal.
- Covenant and default remedies: power of sale or foreclosure timelines and cure periods.
- Exit strategy: sale, refinance to a bank, or paydown schedule.
Use a checklist before signing: confirm lender licensing/registration if applicable, get independent property appraisal, review all fees, and instruct a real estate lawyer to register the mortgage and advise on enforcement rights.
Private Lending Process and Regulations
Private lending in Ontario involves quick underwriting, shorter terms, higher rates, and specific legal disclosures. You should expect a faster decision timeline, tighter loan-to-value limits, and clear paperwork that defines interest, fees, and remedies.
Application and Approval Steps
You start by submitting property details, identification, and proof of income or exit strategy to the lender. Expect the lender to request an appraisal or broker valuation, title search, and estimated repair costs if the property needs work.
The lender will calculate your loan-to-value (LTV) and debt service capability; many private lenders cap LTV around 65–75% for residential deals. You may be required to show an exit plan such as a refinance with a bank or a planned sale.
If approved, the lender issues terms in a mortgage commitment letter that lists interest rate, term length (often 6–24 months), fees, prepayment penalties, and required insurance. Closing follows standard conveyancing: registration of the mortgage on title and disbursement of funds after satisfied conditions.
Ontario Regulatory Framework
Private lending in Ontario must comply with provincial laws governing mortgages, consumer protection, and securities when applicable. Registered lenders and mortgage brokers follow licensing rules under the Mortgage Brokerages, Lenders and Administrators Act, 2006; unregistered private individuals may still be subject to mortgage law and general contract rules.
Disclosure requirements oblige lenders to provide clear terms: interest rate, payment schedule, fees, and penalties. If you borrow from an entity operating as a mortgage brokerage or administrator, that business must be licensed and adhere to compliance, record-keeping, and advertising rules.
Certain activities can trigger federal or provincial securities law if the loan is offered to multiple investors or structured as an investment product. You should verify the lender’s licensing status and request written disclosures before signing anything.
Borrower Rights and Protections
You have the right to receive clear, written disclosure of all material loan terms before you commit. This includes the interest rate, amortization or payment schedule, fees, default remedies, and any security interests placed on your property.
You can request time to review documents and obtain independent legal advice; many private lenders expect you to do so. If a lender or broker is licensed, you can complain to the regulator (FSRA for Ontario) about misleading conduct, improper advertising, or failure to disclose.
In cases of default, Ontario foreclosure and power of sale procedures apply; the exact remedy depends on the mortgage wording. You retain protections under general contract and consumer laws, and you can challenge unconscionable or illegal terms through legal counsel or regulatory complaint processes.
