Private mortgages carry myths: "last resort", "abusive rates", "grey zone". The reality is simpler and more nuanced: it is a legitimate, regulated financial tool designed for the short term, used every year by thousands of Quebec homeowners that bank grids don't serve. Here is how it really works, costs included.
What is a private mortgage?
It is a loan secured by a hypothec on your property, funded by a private lender rather than a bank. The fundamental difference is the decision criterion: where a bank looks first at your income and credit score, a private lender looks first at your property's equity, its value minus what you owe on it.
Like every mortgage in Quebec, it must go through a notary, and the hypothec is registered at the land register. It is not an informal loan: it is a notarized deed, with written terms.
A useful distinction: some players are brokers (they shop your file to lenders), others are direct lenders (they lend their own capital and make the decision themselves). With a direct lender, there is one less intermediary between you and the decision.
Who it's for, and who it isn't for
A private loan makes sense when at least one of these applies: a bank refusal, self-employed income that is hard to document, a tight deadline (purchase, 60-day notice, opportunity), consumer debt to consolidate, an unusual property, or the need for a bridge between two transactions.
It does not make sense as permanent financing for a home when a bank file is within reach: with documented income and good credit, a conventional mortgage will always cost less. An honest private lender will tell you so.
The real numbers: rates, fees, amounts
Let's talk money plainly, because that is the question that matters:
Rates. Indicatively, around 12% on a 1st mortgage and 15% on a 2nd mortgage (a 2nd is riskier for the lender, so it costs more). The exact rate depends on equity, the property and the file.
Fees. Lender fees of 2 to 5% of the loan amount, plus notary fees (about $2,000) and, depending on the case, a property appraisal. Everything should be disclosed in writing before signing. If a lender refuses to put its fees in numbers upfront, find another lender.
Amounts. Total financing (all mortgages combined) is generally limited to 75% of the property's value. Example: a $500,000 property with a current balance of $250,000 allows up to about $125,000 in private financing.
Term. Short terms, typically 6 to 24 months, often with interest-only payments, which keeps the monthly payment low during the transition period.
Why pay more? Three rational reasons
Speed. A decision in under 48 h, funds in as little as 5 business days. When an opportunity or a deadline can't wait 6 to 8 weeks for a bank process, speed has real economic value.
Access. For a self-employed borrower, damaged credit or an unusual building, the question isn't "bank at 5% or private at 12%". The bank said no. The real comparison is "private at 12% or no solution".
Cost over a short term. 12% on $100,000 for 12 months is $12,000 in interest, a figure you can weigh against what it makes possible: saving $200,000 of equity, buying a building below market, or saving even more in credit card interest.
The exit strategy: the most important part
A private loan is a bridge, not a destination. Before signing, the question to settle is: how do I get out? The four classic exits: refinancing with a bank once credit is restored or income is documented (often 6 to 24 months), selling the property at a time you choose, an expected inflow of funds, or renewing on better terms if the situation has improved. A lender who doesn't talk about the exit on the first call isn't working in your interest.
Red flags to watch for
Fees not disclosed in writing; pressure to sign fast; no discussion of an exit strategy; promises of "guaranteed approval"; no notary in the process. A legitimate mortgage in Quebec always goes through a notary.
Frequently asked questions
Does a private loan affect my credit score? The initial assessment can be done without a credit inquiry. The loan itself is generally not reported to credit bureaus the way a card or car loan is.
What is the minimum equity? As a rule, after financing, total loans must stay under 75% of the value, so at least 25% equity is kept.
Which property types qualify? Houses, condos, plexes, income properties and some commercial or rural properties. The property is at the heart of the assessment.
Can I repay before the end of the term? Prepayment terms vary by contract. Ask the question and have the answer put in writing before you sign.
Vortex Finance is a direct private mortgage lender, in Quebec since 2008. Decision in under 48 h, no credit impact, every cost in writing. Estimate your available equity with our free calculator.
General information only; not personalized financial, legal or tax advice. Rates, fees and terms are indicative, vary by file and are confirmed in writing before signing. No approval is guaranteed; every file is assessed individually.
