Bridge two homes or fund a project when a bank cannot move fast enough

Yes, a private mortgage can be one of the most useful tools available, and it does not deserve the bad reputation it sometimes gets. A private mortgage is financing from an individual investor or a mortgage investment company instead of a bank, and because approval rests mainly on the equity in your property rather than your income or credit score, it solves problems a bank simply cannot. People hear “higher rate and fees” and assume it must be a bad deal. The truth is that for the right person at the right moment, a private mortgage can save you far more than it costs. I arrange them carefully, with the full numbers on the table, and only when they serve you.

Private mortgages get a bad rap they do not always deserve

It is true that private mortgages cost more than a bank mortgage. The rate is higher and there are lender fees, because the lender is taking on more risk with far less paperwork. But cost is only half the equation. The question that actually matters is what the private mortgage does for you, and what it saves you. When it protects a deposit, rescues a closing, or gets a project off the ground, the cost is usually a small fraction of the value. Used well, with a clear purpose and a clear way out, a private mortgage is a positive tool, not a negative one.

Bridging two homes, so you can buy before you sell

One of the best uses of private lending is a bridge: financing that carries you across both homes when you want to buy your next place before your current one sells. Most people cannot comfortably afford two mortgages at once, and a private bridge gives you the room and the peace of mind to make the move without a fire sale.

Here is a real example of why it matters. A realtor I work with had a client who was told by her bank that she qualified to own both homes. Then, three days before closing, the bank would not advance the mortgage on her new home, because she still carried the mortgage on her current one. She was about to lose the purchase. We arranged a private bridge that carried her across both properties until her sale closed. It was not cheap, but it saved her somewhere around $40,000, because she kept her deposit instead of walking away, and she avoided the very real risk of being sued for failing to close. That is the power of having this tool ready when a bank’s approval falls through at the worst possible moment.

A tool for entrepreneurs and flips

Private lending is also a genuine engine for entrepreneurs. If you are buying a property to renovate and resell, banks are often the wrong fit, because the timelines are short and the property may not be in lendable condition. Private money moves quickly and looks at the deal.

I have been able to get people into flips with as little as $10,000 down, depending on the project and the equity involved. If the plan is to keep the property and rent it rather than resell, an investment property mortgage is usually the cheaper structure, and private money is what carries you until the property is in a condition a bank will lend on. The money costs more than a bank mortgage, but we build that cost into the project’s cash flow and help carry it through to the sale, so the numbers work and you come out the other side ready for the next project. For an investor who knows what they are doing, that access and that speed are worth far more than the rate.

When a private mortgage makes sense

Beyond bridges and flips, private financing is a tool for a specific moment, not a permanent answer. It can be the right call when you need to close quickly and a bank cannot move in time, when your income is between situations, when your credit needs a year or two to recover, or when you have strong equity but do not fit a bank’s checklist today. The common thread is real equity in the property paired with a temporary obstacle. Private lenders generally lend up to around 75 to 80 percent of the home’s value, counting any existing mortgage, because that equity is their security. Where the goal is to reach that equity while leaving a good first mortgage alone, the private loan is often registered as a second mortgage behind it rather than replacing it. If the underlying problem is permanent rather than temporary, a private mortgage usually is not the answer, and I will tell you so.

What it costs, itemised

I will never gloss over what a private mortgage costs, and the way to see it clearly is to add everything up for the whole term rather than compare a rate to a bank’s rate.

Take an illustrative $100,000 private second mortgage, arranged for a one-year term on interest-only payments.

Item	Illustrative cost
Interest, at 10 percent, interest-only	about $833 a month, or $10,000 for the year
Lender fee, 1.5 percent	$1,500
Broker fee, 1.5 percent	$1,500
Legal work	about $1,500
Appraisal	about $500
Total cost of the year	about $15,000

Private rates run from roughly 6 percent to 15 percent depending on the position, the property and the strength of the exit, so the interest line above is a mid-range example rather than a quote. The fees are steadier: about 1.5 percent to the lender and 1.5 percent to me, so around 3 percent in total on most private files.

Now put that number next to what it is buying. Against the deposit, the failed closing and the litigation risk in the bridge story above, roughly $15,000 was a fraction of the exposure. Against a problem that could have waited three months for a bank to say yes, it is a bad trade and I will say so.

Two details matter about how the money works. Private mortgages are usually interest-only, so the balance does not fall during the term, which is fine when the term is short and the exit is real. And fees are often deducted from the advance rather than paid separately, so a $100,000 loan carrying 3 percent in fees nets you closer to $97,000 at the lawyer’s office. Ask for the net figure, not the face amount, when you are planning what the money has to cover.

In Alberta, a mortgage brokerage has to make its relationship and compensation disclosures in writing, and where a borrower is not represented in a private transaction, a Borrower Disclosure and Consent form gets signed. That is the floor. My practice is to put the whole table above in front of you before anything is signed.

Honest about the cost

I will never gloss over what a private mortgage costs. I lay out the full picture in plain numbers, the rate, the lender and broker fees, and what the term will actually cost you from start to finish, so you can weigh it against the alternative and decide clearly. Sometimes that honest math shows the private mortgage is well worth it, like the bridge that saved a deposit. Sometimes it shows the cost is too high for the benefit, and you are better off waiting or solving the problem another way. Either way, you see the real numbers before you commit to anything.

The three real exits, and what each one needs

An exit is not an intention. It is a specific event with a date and a set of conditions, and there are only three.

A sale closes. The cleanest exit there is. What it needs is a property that will actually sell inside the term, priced for the market rather than for the seller’s hopes, and a term long enough to absorb a slow month or two.

A project finishes. A renovation completes, the property becomes lendable, and either it sells or a mainstream lender takes over. What it needs is a realistic budget with contingency in it, because the failure mode here is a project that runs out of money at 80 percent complete, which is the worst possible place to stop.

A refinance back to a mainstream lender. What it needs is the thing that was broken to be fixed by the end of the term: credit repaired to the point where an insured or alternative lender will look at the file, income documented for long enough to count, or the property back in ordinary condition. This exit is the one that most often slips, because it depends on progress rather than on an event.

I write the exit into the plan at the start and my team stays on the file through the term, because the exit is the part that determines whether this was a smart tool or an expensive detour.

What can go wrong, said plainly

The exit slips. You renew short-term money at short-term cost, paying another set of fees for another year. This is the common failure, and it is why the term should be a little longer than you think you need rather than exactly as long as the plan.

The property does not sell. A bridge assumes a sale. If the market has changed, the assumption has to change with it, which usually means pricing the departing home to sell rather than to test the market.

The renovation costs more than budgeted. Build contingency into the request rather than going back for a second, more expensive advance halfway through.

You cannot pay. This is the one nobody wants to discuss and the reason I decline files. A mortgage is secured against your home, and in Alberta a foreclosure runs through the Court of King’s Bench, which is slower and more procedural than in some provinces but ends the same way. A private mortgage is a tool for a temporary problem with real equity behind it. Where the problem is permanent, it is the wrong tool, and arranging one anyway would make things worse rather than better.

Questions to ask before you sign any private mortgage

Bring these to whoever is arranging it, including me.

1. What is the total cost of the full term, in dollars, including every fee?
2. What will I actually receive at the lawyer’s office after fees are deducted?
3. Is it interest-only, and what is the balance at maturity?
4. What is the exit, and what has to be true for it to happen?
5. What happens if the exit slips by three months, and what does an extension cost?
6. Is the lender in first or second position, and who else is registered on title?
7. Are there prepayment terms, and is there a minimum interest period?

If any of those answers are vague, that is the finding, not the paperwork.

Every private mortgage needs an exit

A private mortgage without an exit plan is a trap, and I will not set one up that way. I arrange it alongside a concrete plan to get you out, whether that is a sale closing, a flip selling, or graduating you back to a traditional lender through a refinance within a year or two once credit or income is where it needs to be. We map that path out before you sign, not after, and my team stays on your file through the term so the exit actually happens rather than drifting into a costly renewal.

Talk it through

If you need to bridge two homes, fund a project, or get past an obstacle the banks cannot solve, let’s look at it together. My team and I will tell you whether a private mortgage is the right move, and if it is, build it with a clear way out.

Sources: the disclosure and consent obligations of an Alberta mortgage brokerage, including the Borrower Disclosure and Consent form used where a borrower is not represented, are set out by the Real Estate Council of Alberta in its guidance on mortgage broker relationships with borrowers and lenders. Rates, fees and payment figures in the cost table are illustrative and are not a quote; every private file is priced on its own property, position and exit.