Private mortgage interest rates in Canada are not fixed or standardized like bank mortgage rates. Each private mortgage is priced individually based on risk.
This means two homeowners borrowing the same amount may receive very different rates depending on their property, equity, and overall situation.
Understanding what affects private mortgage rates helps homeowners anticipate costs and make informed decisions.
Typical Private Mortgage Rate Ranges
Private mortgage rates generally fall within the following ranges:
- 8% to 10%Lower-risk loans with strong equity and clear exit strategies
- 10% to 14%Moderate-risk loans involving credit issues or non-traditional income
- 14% to 18% or higherHigher-risk scenarios with elevated loan-to-value ratios or urgent funding needs
These rates are usually interest-only and calculated annually.
Loan-to-Value (LTV) and Its Impact on Rates
Loan-to-value is one of the most important factors in determining private mortgage rates.
Lower LTV ratios:
- Reduce lender risk
- Often result in lower interest rates
Higher LTV ratios:
- Increase risk
- Typically lead to higher rates and stricter terms
For example, a loan at 60% LTV will usually receive better pricing than one at 75% LTV.
Property Type and Condition
The type and condition of the property directly affect pricing.
Properties that generally receive better rates include:
- Single-family homes
- Well-maintained residential properties
- Homes in stable markets
Higher rates may apply to:
- Commercial or mixed-use properties
- Rural or remote locations
- Properties needing significant repairs
Lenders assess how easily the property could be sold if needed.
Location and Market Demand
Property location plays a major role in private mortgage pricing.
Homes in major urban centres or high-demand markets often receive lower rates due to stronger resale potential.
Properties in smaller towns or less active markets may be priced higher because lenders face increased risk.
Credit Profile and Borrower History
While private lenders focus less on credit than banks, credit history still influences pricing.
Lower rates may be offered when:
- Credit issues are temporary
- Payment history is improving
- Financial explanations are reasonable
Higher rates may apply when:
- Credit issues are recent or ongoing
- Multiple delinquencies exist
- Financial stability is unclear
Credit affects price more than approval.
Exit Strategy Strength
A clear exit strategy can significantly reduce interest rates.
Strong exit strategies include:
- Confirmed refinancing plans
- Properties actively listed for sale
- Expected debt reduction
Weak or unclear exit strategies often lead to higher rates because lenders face greater uncertainty at maturity.
Loan Term Length
Shorter loan terms usually come with slightly lower rates because the lender’s exposure is reduced.
Longer private mortgage terms may increase rates due to:
- Extended risk period
- Market uncertainty
Most private mortgages range from 6 to 24 months.
Urgency and Speed of Funding
When funding is required quickly, pricing may increase.
Urgent situations such as:
- Foreclosure prevention
- Legal deadlines
- Immediate refinancing needs
can result in higher rates due to time pressure and limited lender flexibility.
How Rates Are Calculated and Paid
Private mortgage rates are typically:
- Quoted annually
- Paid monthly
- Interest-only
For example:
- Loan: $400,000
- Rate: 12%
- Monthly interest payment: ~$4,000
Principal is usually repaid at the end of the term.
Can Rates Change at Renewal?
Yes. Private mortgage rates can change at renewal.
Renewal pricing depends on:
- Current LTV
- Market conditions
- Progress toward exit strategy
If risk decreases, rates may improve. If risk remains high, rates may increase.
Questions to Ask About Interest Rates
Before accepting a private mortgage, homeowners should ask:
- Is the rate fixed for the full term?
- What happens to the rate at renewal?
- How does my LTV affect pricing?
- Are there penalties for early repayment?
Clear answers help avoid surprises.
Final Thoughts
Private mortgage interest rates reflect risk, flexibility, and short-term lending structure.
Understanding what affects rates allows homeowners to plan better, manage costs, and avoid unexpected pricing changes.
Note: Rates and costs vary based on your credit profile, available equity, and location.