Skip to main content
Mortgage Squad Advisors
Bad Credit

Private lender mortgage for bad credit: how equity-based approval works.

A private lender mortgage approves on the equity in your home, not a perfect credit score — which is why it works when the banks say no. Expect fast approval, a higher rate and a short term, and a clear plan to exit back to a bank.

Equity-based approvalApprove past bad creditFast closingHigher rate + feesShort 1-year termBuilt-in exit plan
Start your pre-approval — 5 min Chat with Maya4.9 out of 5 stars, 256 Google reviews (opens Google)
No credit pull to begin

Written by the Mortgage Squad Advisors Editorial Team · Reviewed by Surrayya Afzal, Principal Broker, FSRA #M14001433 · Updated August 2026 · Reviewed quarterly; next review November 2026

Bad credit? Past money trouble?
There's still a path. No judgment.
We arrange a short-term mortgage today and map your way back to a Big-6 bank within 12–24 months.
540
Credit score rebuild · 300–900 scale
Under 500
Private / equity
500–659
B-lender
660+
A-lender
Get pre-approved What I can afford
Maya · AI · 24/7
Can I get a mortgage with bruised credit?
FSRA #13737| 15+ languages
100+ lenderscompared on one application
FSRA #13737licensed Ontario brokerage
15+ languagesspoken by our advisors
No credit pullto start your pre-approval

When your credit is bruised, the bank’s answer is often a flat no — the score triggers a decline before anyone looks at your equity, your income, or your story. A private lender works the opposite way. It lends against the value locked in your property, treats a low credit score as a solvable detail rather than a dealbreaker, and can fund in days instead of weeks. That flexibility comes at a price: a higher rate, lender and broker fees, and a short term. Used well, it’s not a trap — it’s a bridge that gets you financed now and sets up a return to bank pricing later.

A couple reviewing mortgage options with an advisor in their living room
On this page
  1. Why a private lender says yes when the bank says no
  2. Equity-based approval: how much you really need
  3. The real cost: higher rate, fees, and a short term
  4. Speed and flexibility when timing is everything
  5. The exit plan: turning a bridge into a fresh start
  6. FAQ

Why a private lender says yes when the bank says no

The difference between a bank and a private lender comes down to one question. A bank asks, first and loudest, what’s your credit score? — and a bruised answer ends the conversation before your equity or your income ever gets a hearing. A private lender asks, how much equity is in the property, and is there a sensible way out? That single shift is why private lending exists and why it works for bad-credit borrowers who’ve been turned away everywhere else.

Private lenders are individuals and investment groups who lend their own capital secured against real estate. Because their security is the property itself, a low credit score, a recent late payment, a consumer proposal, or a discharged bankruptcy are hurdles rather than walls. If the equity is there and the file makes sense, they can approve what an A or B lender can’t. This page sits in our bad credit mortgage cluster and focuses on the private route specifically; our general private mortgage overview covers how these lenders work across every scenario, not just bruised credit.

Equity-based approval: how much you really need

A private mortgage is fundamentally an equity play. Instead of underwriting your credit history line by line, the lender looks at your property’s value and the mortgages already registered against it, then lends up to a maximum loan-to-value. The more equity you hold, the more comfortable the lender is and the better your terms — because that equity is their cushion if anything goes wrong. This is why two borrowers with identical bad credit can get very different answers: the one with more equity in a marketable home is far more financeable.

That also means the property matters as much as the numbers. A standard home in a stable, saleable market is easier to finance privately than an unusual property or a remote location, because the lender is ultimately relying on the home’s value as security. We assess your equity and property first, before any credit pull, so we can tell you quickly and honestly whether a private mortgage is realistic. If you’re weighing a private lender against a traditional one, our private lender vs bank comparison lays out the trade-offs side by side.

The real cost: higher rate, fees, and a short term

There’s no free lunch, and we won’t pretend otherwise. A private mortgage typically carries a higher rate than a bank or B-lender, usually includes a lender fee and a broker fee, and comes with a short term — often around a year, sometimes interest-only. Those costs pay for the flexibility, the speed, and the willingness to look past your credit score. For a dated benchmark, CMHC reported the 25 largest private lenders averaged about 9.6% on single-family mortgages in Q3 20251, but we never quote a fixed advertised rate as if it applies to everyone: pricing depends on your equity, property, location and file, and we disclose the exact rate and every fee in writing before you commit.

The honest way to judge the cost is against the alternative. If a private mortgage stops a power of sale, clears high-interest debt that’s compounding faster, or secures a purchase you’d otherwise lose, the higher rate over a short term can be well worth it. If it doesn’t solve a real problem, it isn’t worth it, and we’ll say so. Walk through the full picture on our private mortgage rates and private mortgage pros and cons pages before you decide, and see when to use a private lender for the situations where it genuinely fits.

Speed and flexibility when timing is everything

Bad-credit situations are often time-sensitive, and speed is where private lending shines. Because approval rests on equity rather than a slow, thorough underwrite of your credit and income, a private mortgage can often close in days rather than weeks once the appraisal and lawyer are in place (never guaranteed). That matters when a bank has just declined you and a closing date is looming, when a mortgage payment is about to default, or when a property purchase would otherwise collapse.

The flexibility extends beyond speed. Private lenders are more accommodating on income documentation — a real advantage for the self-employed, commissioned, or non-traditional earners whose income is genuine but hard to show on a pay stub; our self-employed mortgage page covers those files. Private financing can be arranged as a first mortgage or as a second mortgage behind an existing first you don’t want to disturb, and it can be used to consolidate pressing debts, cover CRA tax arrears, or bridge a gap while you reorganize. Tell us the deadline and the goal, and we’ll tell you honestly whether private is the right tool.

The exit plan: turning a bridge into a fresh start

A private mortgage without an exit plan is expensive; with one, it’s a smart, temporary bridge — and building that exit is the most important thing we do. From the day your private mortgage funds, we set the plan to leave it: make every payment on time, pay down high-interest balances to lower your credit utilization, avoid unnecessary new credit, and let the short term run while your report heals. Late payments can stay on your credit report for up to six years, but their weight fades as new on-time history builds2. Our improve your credit score guide details the specific moves that rebuild a score fastest.

When the term matures — typically after about a year of clean history — many borrowers qualify to refinance to a B-lender or back to a bank at meaningfully lower cost. Because we work with 100+ lenders across private, B and A tiers under FSRA brokerage licence #13737, we can arrange the private mortgage you need today and be ready to graduate you to cheaper financing the moment you qualify, with every rate and fee disclosed in writing at each step. Bad credit is common and temporary; a private mortgage, used with a clear exit, is how you get financed now and rebuild toward the mainstream. When you’re ready, start a no-obligation application or ask Maya (AI) where you stand.

What you get

Why Canadians choose Mortgage Squad Advisors.

Approval based on your home’s equity, not a spotless credit report
Gets you financed when A and B lenders have declined the file
Can close within days once the appraisal and lawyer are in place (no guaranteed timeline)
Flexible on income documentation, useful for self-employed and non-traditional earners
Works for purchases, refinances, and second mortgages behind an existing first
Looks past recent credit events like a proposal, arrears, or a discharged bankruptcy
Short terms (often around a year) so you’re not locked in long
Every rate and fee disclosed in writing before you commit — no surprises
A built-in exit plan to refinance back to a bank once your credit recovers
Access to a deep network of private lenders through one FSRA-licensed brokerage
How it works

Three simple steps, no pressure.

  1. 1

    Confirm the equity

    A private mortgage is an equity play, so we start there: your property’s value and the mortgages already on it. That combined loan-to-value, far more than your credit score, decides what’s possible. A quick 15-minute conversation tells us whether a private lender fits — no bureau pull required to begin.

  2. 2

    Match the lender + disclose the cost

    We shop your file across our private lender network to find the right fit for your property, location and situation, then put the full cost in writing: the rate, the lender fee, the broker fee, and the term. You see the true number before you decide — never a surprise at closing.

  3. 3

    Fund fast, then plan the exit

    Private deals can close in days when speed matters. From the day it funds, we set your exit: rebuild credit, keep payments clean, and refinance to a bank or B-lender when the short term matures — typically in about a year. The private mortgage is the bridge, not the destination.

Start your pre-approval — 5 min
FAQ

Common questions, answered.

Don’t see yours? Ask Maya — instant answer, any time.

How does a private lender mortgage help with bad credit?
A private lender approves based on the equity in your property rather than your credit score. Where a bank declines the moment it sees a bruised report, a private lender asks a different question: is there enough value in the home to secure the loan? If the equity is there and there’s a sensible exit plan, bad credit doesn’t stop the approval. It’s the most flexible tier of lending in Canada, which is exactly why it works when the banks won’t. Our broader private mortgage overview covers how these lenders operate.
Do private lenders check credit at all?
Most will look at your credit, but it carries far less weight than at a bank. The score is one data point among several; the equity in the property is the main event. A low score, recent late payments, or a past insolvency won’t automatically sink the file the way they would at an A-lender. That’s the core difference and the reason private lending exists for borrowers the banks turn away.
How much equity do I need for a private mortgage?
Private lenders lend to a maximum loan-to-value, so you need meaningful equity — the exact amount depends on the lender, the property, and its location. As a general guide, the more equity you hold, the more room a private lender has to approve and the better your terms. Because we assess the equity first, we can tell you quickly whether a private mortgage is realistic for your situation before anything is pulled or committed.
Are private mortgage rates and fees higher?
Yes — typically higher than bank or B-lender pricing, and private deals usually include a lender fee and a broker fee to reflect the added risk and the speed and flexibility they provide. We never present these as a fixed advertised rate; every rate and fee is disclosed in writing for your specific file before you commit. For context, CMHC reported that the 25 largest private lenders (mortgage investment entities) averaged about 9.6% on single-family mortgages in Q3 20251. For how pricing is built, see our private mortgage rates page, and weigh the trade-offs in our private mortgage pros and cons.
How fast can a private mortgage close?
Fast is one of the main reasons borrowers choose private. Because approval hinges on equity rather than a lengthy underwriting of your credit and income, these deals can often close within days once an appraisal is done and the lawyer is instructed, though no one can guarantee a date — useful when a bank has just declined you, a deal is about to fall through, or a payment is at risk. Tell us the deadline and we’ll tell you honestly whether it’s achievable.
How long is a private mortgage term?
Short — often around one year, sometimes interest-only. That’s by design. A private mortgage isn’t meant to be a long-term home; it’s a bridge to get you financed now and give your credit time to recover, so you can refinance to cheaper pricing when the term matures. The short term keeps you moving toward the exit rather than settling into a high-cost mortgage.
What’s the exit plan, and why does it matter?
The exit plan is the most important part of any responsible private mortgage. Because the rate and fees are higher, the goal is to leave — to refinance back to a bank or B-lender once your credit and file have improved, usually after about a year of clean payments. We map that exit before you sign: what needs to change, roughly when you’ll qualify, and where you’ll refinance to. Without an exit, a private mortgage is expensive; with one, it’s a smart bridge.
Can I use a private mortgage as a second mortgage?
Yes, and it’s common. If you have a good rate on your existing first mortgage that isn’t worth breaking, a private lender can register a second mortgage behind it to access equity or consolidate pressing debts, even with bad credit. It leaves your first mortgage untouched. Second-position financing usually costs more than a first mortgage because it ranks behind it3; see our second mortgage page for how it’s structured.
Is a private mortgage safe, or is it a trap?
Used correctly, it’s a legitimate tool, not a trap; in Ontario, private mortgages are arranged through FSRA-licensed brokerages with written cost disclosure. The risk comes from taking one with no plan to leave, letting the higher cost compound. We manage that head-on: full written disclosure of every rate and fee, a realistic assessment of whether you can carry the payment, and a concrete exit before you commit. If a private mortgage isn’t genuinely in your interest, we’ll tell you. Our private lender vs bank comparison and when to use a private lender guide help you judge the fit.

Related products

Bad credit mortgagePrivate mortgageBad credit mortgage requirementsPrivate mortgage ratesPrivate mortgage pros & consWhen to use a private lenderPrivate lender vs bankB-lender vs private mortgageSecond mortgage

Sources & references

Figures on this page are sourced below and re-checked each quarter. Rates, insurer rules and lender policies change — confirm anything you plan to act on with a licensed advisor.

  1. 1. Canada Mortgage and Housing Corporation (CMHC), Residential Mortgage Industry Report (Q3 2025 data) — The 25 largest mortgage investment entities (private lenders) averaged about 9.6% on single-family mortgages in Q3 2025.
  2. 2. Financial Consumer Agency of Canada, How long information stays on your credit report (accessed Sep 2026) — Late payments and accounts sent to collection can stay on your report for up to six years.
  3. 3. Financial Consumer Agency of Canada, Borrowing against home equity (accessed Sep 2026) — Second mortgages usually carry higher rates than first mortgages because they are riskier for the lender.

Ready when you are.

No obligation, and no credit pull to begin. A licensed advisor reviews your file with you, and Maya, our AI assistant, can answer quick questions any time.

Start your pre-approval — 5 min Chat with Maya