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Private Mortgages in BC: When They Make Sense and What They Really Cost

Private mortgage options for a British Columbia home

Table of Contents

A private mortgage is a loan from an individual investor or a mortgage investment corporation rather than a bank. They lend on the property, not on your income, which is why they can approve people banks decline.

What Is a Private Mortgage and Who Uses One? (Short Answer)

The cost is the point. Rates run 8% to 15%, plus lender and broker fees, and once you add everything up the effective annual cost usually lands near 13% to 14%. Terms are short, typically 6 to 24 months.

It is expensive short term money, and it works for exactly one purpose: bridging a specific, temporary gap with a written plan to get out. Used that way it can save a purchase or a home. Used as a long term solution it is how people lose equity.

 

A Lender, B Lender, Private: Where Each One Sits

  A lender B lender Private
Who they are Big banks, credit unions, monolines Alternative lenders, some trust companies Individual investors and MICs
Approves based on Income, credit, ratios Income with flexibility, credit 600 plus Property equity, mainly
Typical rate around 4.3% around 6.5% to 8% 8% to 15%
All in cost over 12 months about 5.5% about 7.5% about 13.5%
Lender fee None 1% common 1% to 4%
Max loan to value 80%, or 95% insured 80% 75%, often 65% to 70%
Term 1 to 5 years 1 to 3 years 6 to 24 months
Stress tested Yes, if federally regulated Yes, usually No

The important idea: these are rungs on a ladder, not permanent categories. Almost everyone using a private mortgage should be planning to move back to a B lender or an A lender within a year or two. That plan is the whole thing. Note the last row: private lenders are not bound by the federal mortgage stress test, which is precisely why they can say yes and also why the risk sits with you.

 

Calculator and financial documents used to compare mortgage costs

What It Costs: Interest Rates, Lender Fees and Broker Fees in BC

The rate is not the cost. Here is the full picture:

Cost Typical range
Interest rate, first mortgage 8% to 12%
Interest rate, second mortgage 10% to 15%
Lender fee 1% to 4% of the loan
Broker fee 1% to 2% of the loan
Legal fees, both sides $1,500 to $2,500
Appraisal $400 to $800
Administration and setup $300 to $700
Renewal fee if you extend often another 1% to 2%

A worked example on a $400,000 first mortgage at 10% for 12 months, with a 2% lender fee and a 1% broker fee:

  • Interest for the year: about $40,000
  • Lender fee: $8,000
  • Broker fee: $4,000
  • Legal, appraisal and admin: about $3,100
  • Total cost of one year: roughly $55,100, an effective annual cost near 13.8%

Most private mortgages are also interest only, so none of that reduces your balance. After twelve months you owe the same $400,000 you started with, having paid $55,000 for the privilege.

Which is exactly why the exit plan is not optional.

 

How Much Equity You Need and How Lenders Set Loan to Value

Loan to value How a private lender sees it
Under 60% Strong. Best available rates and lowest fees
60% to 70% Standard territory for most private deals
70% to 75% Achievable, at higher rates and fees
Over 75% Difficult, and where the worst terms live

Private lenders price on equity because equity is their protection. Loan to value counts all charges on title. If you have a $700,000 first mortgage on a $1.4 million North Vancouver home and you want a $200,000 second, your combined LTV is 64%. That is a workable file. Getting the denominator right matters, and a BC Assessment is not the same as market value.

Two things affect pricing beyond LTV. Location matters, and North Shore properties are well regarded because they are liquid. And property type matters: a standard detached home or townhouse is straightforward, while raw land, an unfinished renovation or an unusual property draws higher rates or a decline.

Cities where you can receive our professional real estate buying and selling services

 

Borrowers reviewing a short-term mortgage plan

Term Length and the Exit Plan You Must Have Before You Sign

Do not sign a private mortgage without being able to say, in one sentence, how it gets repaid.

Legitimate exits:

  • Sell the property within the term. Common and clean, particularly for someone who needs to hold a home through a separation or an estate. If that is the plan, know what it costs to sell a home in BC before you count on the proceeds.
  • Refinance to a B lender once credit is repaired or income is documented. Requires an actual plan, with dates, and a credit file heading the right way. See what actually moves your credit score.
  • A known cash event: a business sale, an inheritance already in probate, a maturing investment. Estate timelines are slower than people expect, as our guide to probate fees and timelines in BC sets out.
  • Complete a renovation and refinance on the improved value.

Not exits:

  • “Rates will come down”
  • “I will figure it out”
  • “I will just renew it”

That last one is the trap. Renewing a private mortgage typically means another 1% to 2% fee, and a lender who knows you have nowhere else to go. Two or three renewals in and the fees alone have consumed a serious amount of equity.

The safest structure is a term slightly longer than your exit needs. If you expect to refinance in nine months, take a twelve month term rather than a six month one, and confirm the prepayment terms so you can leave early without a large penalty.

 

Business agreement being reviewed before signing

Red Flags in a Private Mortgage Offer

  • Fees above about 5% combined. Well outside normal.
  • A large fee taken before funding. Legitimate fees are deducted at closing, not paid upfront.
  • Vague or missing prepayment terms. You need to know exactly what it costs to leave early.
  • A term under six months with no clear reason.
  • No appraisal. A lender who does not care about the value is pricing for a foreclosure.
  • Pressure to sign quickly without time for independent legal advice.
  • The broker will not disclose their fee in writing. In BC brokers must disclose compensation. Insist on it.
  • A lender who will not identify themselves. You are entitled to know who holds a charge on your home.

Get independent legal advice on any private mortgage. Not the lender’s lawyer. Your own, and on a file like this it should be a lawyer rather than a notary.

Specialized North Shore services

 

Alternatives to Try First

Before a private mortgage, work through this list honestly:

  • A B lender. If you have 20% equity and a credit score around 600, a B lender at 6.5% to 8% is dramatically cheaper. Many people go private who would have qualified here.
  • A credit union. Provincially regulated, not bound by the federal stress test, often flexible on self employed and non standard income.
  • A HELOC on existing equity, if you still have room. Prime plus 0.5% beats 10% by a wide margin.
  • Property tax deferment, if you are 55 or older or supporting a child and the pressure is a tax bill rather than a mortgage. See how BC property tax deferment works and what it now costs.
  • Family, with a written, registered agreement and independent legal advice on both sides.
  • Selling. Nobody wants to hear it, but if the plan is to sell within eighteen months anyway, paying $55,000 to delay it rarely makes sense. For an owner with more house than they need, downsizing from a house to a condo or townhome often solves the cash flow problem outright.

That last option deserves a fair hearing. If you are considering a private mortgage to hold onto a North Shore property through a difficult period, it is worth knowing what the property would actually sell for today, and what the market looks like over your likely timeline, before you commit to expensive money. Navid Hakimi will give you a straight valuation of your home and an honest read on the market with no obligation to list, and sometimes that number makes the decision obvious in either direction.

 

Frequently Asked Questions

What credit score do I need for a private mortgage?

There is generally no minimum. Private lenders lend against equity, not credit.

Can I get a private mortgage with no income?

Often yes, if there is sufficient equity and a credible exit plan.

Are private mortgages regulated in BC?

Mortgage brokers are regulated by BCFSA and must disclose compensation. The loans themselves have more freedom than bank lending, which is why independent legal advice matters.

How fast can one close?

Often one to two weeks, sometimes faster. Speed is a real advantage.

Are they always interest only?

Usually. Your balance does not go down unless you make extra payments.

What happens if I cannot repay at maturity?

You renew at additional cost, refinance elsewhere, or sell. If none of those happen, foreclosure proceedings can begin.

Can I get a private second mortgage behind my bank first?

Yes, that is one of the most common structures. Rates are higher on a second, and it is also the usual way buyers try to fund the gap on an assumable mortgage.

How much are broker fees?

Typically 1% to 2%, and they must be disclosed in writing.

Is a MIC different from an individual private lender?

A mortgage investment corporation pools investor money and tends to be more institutional and consistent. An individual lender can be more flexible but more variable.

Will a private mortgage hurt my credit?

Private lenders often do not report to the bureaus, so it may neither help nor hurt. That also means it will not rebuild your credit, which matters if your exit plan depends on doing so.

 

Turned Down by the Bank? Let’s Map Out Your Options

A bank declining you is not the end of the road, but a private mortgage should be the third or fourth option you consider, not the first. Many people who end up paying 13% would have qualified at 7% with a different lender or a slightly different structure.

Navid Hakimi works with North Shore homeowners at this decision point, alongside local mortgage professionals: what the property is genuinely worth today, whether bridging makes sense over your timeline, and what the honest alternatives look like, including the one nobody wants to raise.

Reach out for a confidential conversation and a current valuation of your home, with no obligation.

Rates, fees and lender practices current as of September 2026 and vary widely. This is general information, not mortgage or legal advice. Always obtain independent legal advice before signing a private mortgage.

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