What is the Typical Interest Rate for Private Mortgage Services?

Private mortgage service plays a vital role in helping borrowers access funds when traditional lenders are not a fit. Whether due to unconventional income documentation, a need for speed, or damaged credit, many turn to private lenders for flexible borrowing solutions. But one of the most important factors borrowers consider when evaluating this option is interest rates.

The interest rate on a private mortgage isn’t standardized. Unlike banks or credit unions that offer regulated and uniform rates, private lenders work on a case-by-case basis. This flexibility comes at a cost — typically higher interest rates — which reflect the increased risk assumed by the lender.

What is a Private Mortgage?

Before discussing interest rates, it’s important to define what a private mortgage is. A private mortgage is a loan secured against real estate, offered by a lender who is not a bank, credit union, or institutional entity. The lender could be an individual, a mortgage investment corporation (MIC), or a group of investors.

Private mortgages are most commonly used for:

• Borrowers with low credit scores

• Self-employed individuals without standard income proof

• Properties that don’t meet bank requirements

• Bridge financing

• Construction or renovation projects

• Quick closings in competitive markets

Since these situations typically present more risk than bank mortgages, the interest rates tend to be higher.

What is the Typical Interest Rate for Private Mortgage Services?

The typical interest rate for a private mortgage service in Canada or similar developed markets generally ranges between 7% and 13% annually. However, this range can shift depending on several factors, including:

• Loan-to-value (LTV) ratio

• Location and condition of the property

• Borrower’s credit score and financial history

• Type of property (residential, commercial, rural, etc.)

• Term length and repayment structure

For example, a borrower with an LTV under 65%, a prime property in an urban area, and a clean repayment history might receive a private mortgage at around 7% to 9%. In contrast, someone with credit challenges or a high LTV may be looking at 11% to 13% or more.

Factors That Influence Private Mortgage Interest Rates

Private lenders assess risk differently from traditional financial institutions. Instead of rigid qualification metrics, they look at the whole picture, primarily focusing on the security of the asset and exit strategy.

1. Loan-to-Value (LTV) Ratio

The LTV is one of the most important indicators in a private mortgage. It’s calculated by dividing the loan amount by the value of the property.

• Lower LTV (below 65%) = Lower interest rates

• Higher LTV (above 75%) = Higher interest rates

Lenders want to ensure their investment is protected even in a downturn, so higher LTVs carry more risk and command a higher rate.

2. Credit History and Score

While private lenders are generally more flexible, they still take credit history into account.

• Good credit: 680+ may receive better rates

• Poor credit or recent bankruptcies: Expect rates closer to 12% or more

3. Property Type and Location

Urban, easily marketable properties in major cities typically result in more competitive rates.

• Condos, single-family homes in metro areas = Lower risk

• Rural land, commercial properties = Higher risk and rates

4. Income and Debt Serviceability

Although stated income is acceptable in many cases, lenders still assess whether the borrower can reasonably make payments. High debt levels or inconsistent cash flow can raise red flags.

5. Term and Exit Strategy

Shorter terms, such as 6 months to 1 year, may come with slightly lower rates, especially if the borrower has a solid plan for repayment, whether through refinancing, selling, or another source of income.

Why Do Private Mortgage Rates Tend to Be Higher?

Private mortgage rates are higher because private lenders are taking on increased risk and offering quicker access to funds. Borrowers may not qualify for bank financing due to:

• Poor or unestablished credit

• Recent job changes

• Non-traditional income (freelancers, gig workers, business owners)

• Property issues (zoning, condition, marketability)

Private lenders don’t rely on the same regulatory frameworks as banks, allowing them more flexibility. In exchange, borrowers pay for that convenience through elevated interest rates and possibly additional lender fees.

Typical Fee Structure Alongside Interest Rates

In addition to interest rates, borrowers should be aware of the associated fees with private mortgage services. These can include:

• Lender fee: 1%–3% of the loan amount

• Broker fee: Typically 1%–2%, depending on the broker

• Legal fees: Required for both borrower and lender

• Appraisal fee: Paid upfront to determine property value

• Admin fees: May include setup or processing fees

These fees are usually deducted from the loan proceeds, so while the headline rate might seem manageable, the total borrowing cost should be carefully reviewed.

Benefits of Private Mortgage Services Despite Higher Rates

Even with higher rates, many borrowers choose private mortgage service providers because of the significant benefits.

• Fast approvals and funding — Often within days

• Minimal documentation — Especially useful for self-employed

• Flexible terms — Short-term and interest-only options available

• Higher acceptance rates — Ideal for credit-challenged or unique properties

• Bridge solutions — Useful between buying and selling homes

For many, the convenience and opportunity outweigh the cost, especially when time or circumstances are tight.

When a Private Mortgage Makes Sense?

Borrowers shouldn’t look at interest rates in isolation. The real question is: Does a private mortgage solve a short-term issue that can be corrected later?

Situations where private mortgages are often the right fit:

• Short-term bridge financing

• Paying off tax arrears or high-interest debt

• Renovating or flipping a property

• Buying a property quickly in a competitive market

• Building or construction projects

• Rebuilding credit with an eventual goal of refinancing with a bank

The higher cost is often justified when the borrower has a clear strategy and timeline for resolving their financial need or qualifying for traditional financing later on.

Red Flags and Cautions for Borrowers

Before entering into any private mortgage agreement, it’s essential to perform due diligence. While many private lenders operate professionally, not all do. Be cautious of:

• Unclear or unregistered lenders

• Excessive fees buried in contracts

• Vague or aggressive repayment terms

• Lenders who push deals without proper appraisals

Work only with licensed mortgage professionals, and always consult a legal expert before signing any documents.

How to Secure a Lower Private Mortgage Interest Rate?

While you may not match the rates offered by banks, it’s still possible to negotiate better terms on a private mortgage with proper preparation.

Ways to Lower the Rate:

1. Offer a lower LTV – More equity reduces risk

2. Provide a solid repayment plan – Strong exit strategies matter

3. Clean up your credit if possible – Even small improvements help

4. Choose a marketable property – Urban homes are easier to underwrite

5. Opt for shorter terms – Lenders may offer discounts for 6-12 month terms

6. Work with experienced mortgage professionals – They negotiate on your behalf

How Long Do Private Mortgage Terms Typically Last?

Unlike conventional mortgages that run 15 to 30 years, private mortgages are short-term in nature. The standard term is between 6 months to 3 years, with most falling in the 12-month range.

This gives borrowers a temporary solution while they:

• Repair credit

• Stabilize income

• Sell the property

• Secure traditional financing

At the end of the term, borrowers typically refinance, repay, or extend the loan.

Comparing Private Mortgage Rates to Traditional Lenders

Here’s a quick comparison:

Private mortgages aren’t designed to replace traditional loans — they exist to fill gaps and offer rapid, customized financing when traditional routes aren’t available.

Why Choose Trillium Mortgage?

At Trillium Mortgage, we specialize in connecting borrowers with the right private mortgage service based on their goals, circumstances, and property type. We understand that not every borrower fits the mold of a traditional lender, and that shouldn’t be a barrier to securing a property, solving an urgent financial need, or investing in growth.

Here’s what sets us apart:

• We focus on transparent, fair lending practices

• We offer solutions tailored to your unique situation

• Our turnaround times are fast, with approvals often within 24–48 hours

• Our team has access to a wide range of private lenders across Canada

• We’re here to help you find a short-term solution that leads to long-term success

Whether you’re self-employed, in need of quick capital, or navigating a complex property transaction, Trillium Mortgage is committed to finding a solution that works for you.