Private lender vs bank: which mortgage route fits your situation?
A bank (or A-lender) offers the lowest rates but qualifies you on credit, provable income and strict federal rules — and moves slowly. A private lender lends against your home's equity: faster, far more flexible, and open when a bank says no — but at a higher rate, with fees, and on a short term. For most people a bank is the goal; a private mortgage is a short-term bridge with a clear exit plan back to it.
Bank = lowest rate, strict rulesPrivate = equity-driven, fast, flexiblePrivate costs more, short termPrivate is a bridge, not foreverAlways plan the exit
Choose a bank or A-lender if you qualify — strong credit, provable income and a property they'll lend on — because you'll get the lowest rate and the longest term. Choose a private lender when a bank won't work right now: you've been declined, you're self-employed with hard-to-document income, your credit is bruised, you have tax arrears, or you need to close in days. A private mortgage is equity-based, so approval hinges mostly on your home's value and your down payment or existing equity rather than your income and credit. It's faster and more flexible, but expect a higher rate, lender and broker fees, and a short term (often around a year). Treat it as a bridge with a defined exit — repair credit, document income, or refinance back to a bank — not a permanent solution. A broker can price both and map that exit before you commit.
At a glance
Which one is built for you?
A
Bank / A-lender
The lowest-rate, longest-term option, offered to borrowers who meet strict credit, income and property criteria under federal lending rules. Slower and less flexible, but the cheapest money available.
Best for
You have strong, provable income and good credit
Your property is standard and easy to appraise
You want the lowest rate and a long term
You have time — no urgent closing pressure
B
Private lender
An equity-based lender that qualifies mainly on your home's value rather than your income and credit. Fast and flexible, open when a bank says no — at a higher rate, with fees, on a short term.
Best for
You've been declined by a bank or B-lender
You're self-employed or have complex income
You need to close in days, not weeks
You need a short-term bridge with an exit plan
Side by side
The full comparison
Factor
Bank / A-lender
Private lender
What they qualify on
Credit + provable income (+ property)
Home equity (property value first)
Rate
Lowest available
Higher — reflects the added risk
Fees
Minimal
Lender + broker fees, disclosed upfront
Speed to fund
Weeks
Often days when it's urgent
Flexibility on income/credit
Strict — federal rules apply
Flexible — case-by-case on equity
Typical term
Long (e.g. 5-year terms)
Short — commonly around a year
Best used as
Your long-term mortgage
A short-term bridge with an exit
Stress test
Yes — federally regulated
Generally not applied the same way
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A bank or A-lender offers the cheapest mortgage money in Canada, and it prices that way because it lends conservatively. To approve you it wants to see good credit, income it can verify with pay stubs, letters of employment or two years of self-employed filings, and a property that's standard and easy to appraise. Federally regulated lenders also apply the stress test, qualifying you at a higher rate than you'll actually pay to make sure you can weather increases.
Those guardrails are exactly why banks decline files that are perfectly sensible in real life. A self-employed owner who writes income down for tax, a borrower recovering from a rough credit patch, someone with CRA arrears, or a purchase that has to close in a week — none of those fit neatly into an A-lender's boxes, so the answer is often no. A decline isn't a verdict on you; it usually just means your file doesn't match one lender's rulebook right now. That's the gap a private mortgage is built to bridge.
How a private lender qualifies you — equity first
A private lender looks at your situation from the opposite direction. Instead of leading with credit and income, it leads with your property: how much equity you hold, the home's value and marketability, and how much you're borrowing against it (the loan-to-value). If there's meaningful equity and a credible plan, a private lender can fund files a bank won't touch — bruised credit, non-traditional income, tax arrears, or a fast close.
That equity-based approach is what buys you speed and flexibility. Deals that take a bank weeks can often fund in days, and terms are negotiated case by case rather than dictated by federal ratios. The trade-off is cost: a private mortgage carries a higher rate than a bank, plus lender and broker fees, because the lender is taking on more risk with less documentation. A good broker discloses every one of those costs in writing before you commit, so you're weighing the real number — not a surprise at closing.
The real trade-off: rate and term vs access and speed
The honest comparison isn't "good lender vs bad lender" — it's a straight trade-off. A bank gives you the lowest rate and a long term but demands you fit its rules and wait. A private lender gives you access and speed when you don't fit or can't wait, but you pay more for it and the term is short — commonly around a year rather than five.
That short term is the point people most often miss. A private mortgage isn't designed to be your forever mortgage; it's designed to solve a specific, time-limited problem — closing a purchase, clearing arrears, buying time to fix credit — and then be replaced. Judged as a permanent loan, the higher rate looks bad. Judged as what it actually is — a bridge that unlocks something a bank couldn't, for a defined stretch — the cost can be entirely worth it. The math only works when you're clear on which you're buying.
Private as a bridge: always plan the exit
The single most important rule with private lending is to treat it as a bridge with an exit plan, never an open-ended arrangement. Before you sign, you should know exactly how and roughly when you'll get off it: repair your credit over 12 to 24 months and refinance back to a bank, document a full year of self-employed income so an A- or B-lender will take the file, sell the property, or resolve the arrears that caused the decline. The exit is what turns a high-rate loan into a smart, temporary tool.
This is where working through a broker matters most. With access to 100+ lenders — banks, B-lenders and private — a broker can price both routes side by side, tell you honestly whether a bank or B-lender might still say yes before you reach for private, and map the specific exit back to lower-cost financing. Under FSRA licence #13737, every rate and fee is laid out in writing first. Start a no-obligation review on our application page, or ask Maya which route fits your situation any time.
Your situation
Which is right for you?
Strong credit, salaried, no rush
Usually: Bank / A-lender
You fit the rulebook, so take the cheapest money. A broker still shops multiple A-lenders so one application gets you the best available rate and term.
Declined by the bank last week
Usually: Private (with an exit)
A decline usually means one lender's rules, not a dead end. A private bridge can fund now while you repair the issue and refinance back to a bank later.
Purchase must close in 5 days
Usually: Private lender
When a bank can't move fast enough, an equity-based private lender often can fund in days — buying you the close, with a plan to refinance afterward.
Self-employed, income hard to document
Usually: Depends — price both
A B-lender may still work at a lower cost than private. A broker prices both against your equity and timeline before you decide.
FAQ
Common questions, answered.
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What's the difference between a private lender and a bank?
A bank (A-lender) qualifies you mainly on credit and provable income under strict federal rules, and offers the lowest rates on long terms — but it's slower and declines files that don't fit. A private lender qualifies mainly on your home's equity, so it can fund bruised-credit, complex-income, tax-arrears or urgent files a bank won't. The trade-off is a higher rate, lender and broker fees, and a short term. For most people a bank is the goal and private is a short-term bridge.
Is a private mortgage more expensive than a bank mortgage?
Yes — a private mortgage carries a higher rate than a bank, plus lender and broker fees, because the lender takes on more risk with less documentation. We don't publish a fixed rate because it depends on your equity, property and file. The key is that it's short-term: judged as a bridge that unlocks something a bank couldn't, the cost is often worth it. A good broker discloses every fee in writing before you commit.
When should I use a private lender instead of a bank?
When a bank won't work right now: you've been declined, you're self-employed with income that's hard to document, your credit is bruised, you have CRA tax arrears, or you need to close in days rather than weeks. In those cases a private lender's equity-based approval can bridge the gap. If you do qualify at a bank or B-lender, that's almost always the cheaper route, so it's worth pricing both first.
How does a private lender decide whether to approve me?
A private lender leads with your property rather than your income and credit. It looks at how much equity you hold, the home's value and marketability, and the loan-to-value you're asking for. If there's meaningful equity and a credible plan to repay or refinance, it can approve files a bank would decline. Income and credit still matter to the exit plan, but they aren't the gatekeeper the way they are at a bank.
How long does a private mortgage last?
Private mortgage terms are short — commonly around a year, versus the longer terms a bank offers. That's by design: a private mortgage is meant to solve a specific, time-limited problem and then be replaced, not to be your permanent mortgage. Before you sign, you should have a clear exit — refinancing back to a bank, documenting income, resolving arrears, or selling — so the short term works in your favour.
Can a broker help me choose between a private lender and a bank?
Yes — that's exactly where a broker adds value. With access to 100+ lenders including banks, B-lenders and private lenders, a broker can price both routes side by side, tell you honestly whether a lower-cost option might still approve you before reaching for private, and map the exit back to a bank. Under FSRA licence #13737, all rates and fees are disclosed in writing upfront, so you decide with the real numbers in front of you.
