Private Mortgage Exit Strategy: How to Move Back to an A Lender

A private mortgage is expensive by design — it's a short-term bridge, not a place to stay. But too many homeowners take one in a crisis, make the payments for a year, and then face renewal at the same high rate because they never built a plan to get out. A proper exit strategy is not optional: it's the first thing a good broker should discuss before placing a private deal.

The short answer

A private mortgage should always have an exit strategy — typically 12–24 months to improve your credit, pay down debt, or stabilize your income enough to qualify with an A or B lender. Without a plan, you renew at private rates indefinitely, paying an extra 4%–8% per year compared to what a bank would charge.

Why you need an exit strategy before you sign

Private lenders issue one-year terms (sometimes two) because they expect to be paid out. The rate they charge reflects that expectation. When borrowers renew a private mortgage without improving their position, they've effectively stayed at the emergency level of financing — paying crisis rates for a non-crisis situation. Compounded over three or four years, the extra interest cost is often larger than the original problem the private mortgage solved.

Your broker should be asking: "How are you getting out of this?" before committing the deal. If they're not, ask yourself.

The 3 paths back to A lending

Path 1: Rebuild credit and income, qualify directly

The most common path. You take the private mortgage to buy time, then spend 12–24 months rebuilding your credit score and documenting your income. By renewal, you can qualify for a B lender or A lender directly. This works when the reason for the private mortgage was a temporary event — a missed payment streak, a period of self-employment with low declared income, a recent consumer proposal.

Realistic timeline: 12–18 months for most credit repair cases. Consumer proposal: 2 years after completion before most A lenders will consider you.

Path 2: Sell the property

You take the private mortgage as a bridge — you're going to sell within the term anyway. The sale pays out the private mortgage and you move on. This works for people transitioning out of a property for any reason: downsizing, separation, moving cities, or selling after repairs that will increase the sale price.

Make sure the sale timeline actually fits the private term. If you expect to sell in 8 months but the private term is 6, you'll need a renewal or extension — budget for that possibility.

Path 3: Refinance to B lender, then to A

If you can't qualify for an A lender at the end of the private term but you've improved enough for a B lender (Equitable Bank, Home Trust, Haventree, etc.), the B step is worth taking. B lenders charge less than private: you go from paying 10%+ to paying 6%–7% while you complete the credit rebuild. Then you move to A. A two-step exit costs more than a direct exit, but it's far cheaper than another private renewal.

What to do during your private term

Your broker should check in every few months. But you should also be actively working the exit:

• Pay every bill on time — every missed payment during your private term resets the credit recovery clock.
• Pay down revolving credit — get credit card and line of credit balances below 30% of the limit. This alone can add 30–50 points to your score over 6 months.
• Build your credit history — if you have thin credit, a secured credit card used lightly and paid monthly rebuilds your profile faster than anything else.
• Document your income — if the reason for the private mortgage was unprovable income, file your taxes, keep bank statements, and build a paper trail that a future A lender can use.
• Don't take on new debt — no car loans, no new credit applications, no co-signing during your private term. Every new inquiry and new obligation works against your exit.
• Get a credit check at 6 months — pull your Equifax and TransUnion reports yourself (free at annualcreditreport.ca). Check for errors and see where you stand.

How your broker should help you plan the exit

A broker who places you in a private mortgage and disappears is not a broker worth working with. What a good private mortgage broker does:

• Sets a target credit score and debt ratio before you sign — "we need you at 640 and TDS under 44% to qualify at B"
• Checks in every 3–6 months on your progress
• Begins shopping the exit at 9 months, not 11— so you have a commitment before renewal pressure
• Considers the total cost of the private term vs. the alternatives, and shows you the math
• Coordinates with you on the legal and appraisal timing so the exit closes cleanly

At Mortgage Squad Advisors, every private mortgage file comes with a planned exit — we don't place a deal without knowing how you're getting out. See how we structure private mortgages.

Frequently asked questions

What credit score do I need to qualify for a B lender from private?

Most B lenders want a minimum of 550–600, with the better rates starting at 620–640. But credit score is only one factor — your total debt service ratio, income documentation, and property type all matter. Your broker can run the numbers against current B lender guidelines to give you an exact target.

What happens if I can't exit the private mortgage at renewal?

Most private lenders will renew for another term, but at a fee. If your position hasn't improved, you'll pay another lender fee (typically 1%–2%) on top of the ongoing rate. Some lenders will also review the property value at renewal — if it has dropped, they may require you to pay down the balance to maintain their LTV limit. It's expensive and stressful. The exit plan is specifically designed to prevent this.

Can I sell and buy a different property during a private term?

Yes, but it's more complex. You'd use the proceeds from the sale to pay out the private mortgage, and then finance the new purchase — ideally with a B or A lender if your situation has improved. Some private lenders allow a property substitution (transferring the mortgage to the new property) rather than a full payout, but this is deal-specific.

Is a private mortgage the same as a hard money loan?

"Hard money" is a US term. In Canada, the equivalent is simply a private mortgage or a MIC (Mortgage Investment Corporation) loan. The concept is the same — equity-based, short-term, higher rate — but the regulatory and legal framework is different. In Ontario, private lenders must comply with the Mortgage Brokerages, Lenders and Administrators Act and any applicable FSRA requirements.

Already in a private mortgage? Let us build your exit plan — talk to an advisor or explore all mortgage options.