Private Mortgage vs. the Alternatives

When you need to raise money against a property, or you can't get financing from a bank, there are five realistic paths in Canada: a bank (A-lender) mortgage, a B-lender mortgage, a private mortgage, a HELOC (home equity line of credit), and a refinance of your existing mortgage. They are not ranked from best to worst. Each one wins in a specific situation and loses badly in others.

The wrong choice is expensive in one of two ways: pay too much interest by going private when a bank would have said yes, or waste weeks on a bank application that was never going to fund before your deadline. This guide compares all five on cost, speed, flexibility and what they actually require, then gives you a decision framework to match your situation to the right one. For the private option in depth, see our private mortgage page and the complete private mortgage guide.

An A-lender is a chartered bank or prime lender. It offers the lowest rates available and the most amortization flexibility, but it enforces the strictest rules: verified income, a solid credit history (minimum scores vary by lender and insurer), debt-service ratios within guidelines¹, and the federal stress test at the greater of your contract rate + 2% or 5.25%².

Choose a bank when your income is documentable, your credit is clean, and you are not on a tight deadline: you get the best rate available and there is no reason to pay more. It is the wrong choice when you are self-employed with write-downs, a newcomer without Canadian credit history, rebuilding credit, or working against a closing date the bank's process can't meet. In those cases a decline isn't a reflection on you. The bank's rules simply don't fit the file yet.

A B-lender is an alternative lender, typically a regulated trust company, smaller bank or monoline lender, that still verifies income and credit but flexes on the ratios and the story. They accept bruised credit, extended debt ratios, and broader income (including self-employed and commission) that a bank rejects. The cost is a premium over A-lender pricing (illustratively about 0.5–1.5%, varying by file and market) plus a lender fee, often around 1% on many files.

Choose a B-lender when a bank has declined you but you still have some provable income and a credit story that's imperfect rather than broken. It's far cheaper than private and a natural first stop below the banks. It's the wrong choice when you have almost no provable income, a very short deadline, or a property or situation even a B-lender won't underwrite; that's where private takes over. See our A-lender vs B-lender comparison.

A private mortgage is funded by a MIC, private company or individual lender and underwrites your equity first, with income and credit secondary³. That's why it funds files the banks and B-lenders decline, and why it's usually the fastest option: a commitment can sometimes come within days and funding within one to three weeks. As an illustrative guide, not today's rates, private firsts have often run roughly 7–10% and seconds roughly 9–13%, plus lender and broker fees of about 1–2% each. CMHC reported that the largest private lenders averaged about 9.6% on single-family loans in Q3 2025⁴.

Choose private when you have real equity but can't satisfy a bank or B-lender: self-employed with limited documentation, a newcomer, rebuilding credit, facing a tax or arrears deadline, or needing to move faster than an institution can. It's the wrong choice as a long-term arrangement or when a B-lender would have approved you anyway. The rule with private is simple: use it as a short bridge with a written exit plan back to cheaper financing, never as a destination. Full detail on our private mortgage page.

A HELOC (home equity line of credit) is revolving credit secured against your home. At federally regulated lenders the revolving HELOC portion is capped at 65% of your home's value, within an 80% combined limit with your mortgage⁵⁶. You draw what you need, pay interest only on the balance you use, and re-borrow as you repay, which suits ongoing or unpredictable needs like renovations, a business cushion, or bridging.

The trade-offs: the rate is usually variable (tied to prime, so it moves with rate changes), and you generally need to qualify at a bank. Income, credit and the stress test all apply, so a HELOC is not a workaround for a bank decline. Choose a HELOC when you qualify at an A-lender, have significant equity, and want flexible access rather than a lump sum. It's the wrong choice when you can't pass bank qualification (a private second mortgage fills that gap) or when you'd be tempted to carry a large balance long-term at a variable rate. See how a HELOC works.

A refinance replaces your existing mortgage with a new, larger one and takes the difference in cash, up to 80% of your home's value with a prime lender⁷. Mortgage insurance isn't available to push a refinance higher (the only exception is an insured refinance to add a secondary suite)⁸, so borrowing above 80% means a B-lender or private second mortgage at a higher rate plus fees. A refinance is the cleanest way to access a large lump sum at a low rate when you qualify, and it consolidates everything into one payment. The catch is that you re-open the whole mortgage: you requalify (income, credit, stress test), you may pay a prepayment penalty to break your current term⁹, and you re-price the entire balance at current rates.

Choose a refinance when you need a substantial lump sum, you qualify at a bank, and either your current rate is close to today's or your term is nearly up (so the penalty is small). It's the wrong choice when you'd break a much lower existing rate. That's precisely when a HELOC or private second mortgage can be cheaper overall, because you keep the good first mortgage untouched and borrow only against the equity you need. See refinancing and second mortgages.

Work through it in order:

• Can you qualify at a bank (provable income, credit that meets the lender's minimum, ratios in line)? If yes, the only question is lump sum vs. flexible access. Big one-time need and a low existing rate you want to keep: HELOC or bank second. Big need and rate not a concern: refinance, up to 80% of value. Best rate, no rush: A-lender.
• Bank says no, but you have some provable income and imperfect (not broken) credit? B-lender. It's the cheapest step down from the banks.
• Bank and B-lender both out, but you have real equity, or you're against a hard deadline? Private mortgage, paired with a written exit plan.
• Want to keep a low first mortgage while raising cash? A second mortgage (a HELOC if you qualify at a bank, private if you don't) often beats refinancing the whole balance.

The honest summary: don't pay private rates for a B-lender problem, and don't waste weeks on a bank file that can't fund in time. Match the tool to the situation.

Rough, illustrative comparison (actual numbers vary by file and market; for current bank pricing see our live rate board):

• A-lender (bank): lowest rate; slowest (often a few weeks); needs full income, strong credit, stress test.
• B-lender: roughly 0.5–1.5% over bank pricing plus about a 1% fee; moderate speed; needs some income and a credit story.
• Private: roughly 7–10% (first) / 9–13% (second) plus about 1–2% lender and broker fees each; fastest (days); needs equity and an exit plan.
• HELOC: usually variable, priced off prime; needs bank qualification; revolving access up to 65% of value.
• Refinance: current market rate on the whole balance; needs bank qualification; capped at 80% of value; may incur a prepayment penalty.

Cost isn't just the rate. Weigh the fees, the penalty to break an existing term, and how long you'll actually carry the balance.

The best choice depends on your income picture, credit, equity, existing rate and timeline, and often the right answer is a combination (a private bridge now, a B- or A-lender refinance in 12–18 months). Mapping that path is exactly what a broker does.

Mortgage Squad Advisors is an FSRA-licensed Ontario brokerage (FSRA #13737) that arranges all five in Ontario (bank, B-lender, private, HELOC and refinance); files outside Ontario are handled by licensed mortgage professionals in your province through our partner network. We will tell you honestly when private isn't the right call. Read the complete private mortgage guide, explore the private mortgage and alternative lending pages, or get a no-obligation assessment, with no credit pull to begin.