When a bank will not renew an Ontario mortgage, some homeowners start looking at private mortgage lenders. That is the subject of this article: when a private mortgage may be considered, how those lenders typically look at a file, and what the product is not.
A private mortgage is not the first step after a frightening letter, and it is not automatically available. Another bank or an alternative (B) lender may still be possible. Private financing sits further along that path. It is usually short-term, usually more expensive than a conventional mortgage, and it needs a realistic plan for leaving it.
The Financial Consumer Agency of Canada (FCAC) requires a federally regulated lender, such as a bank, to notify you at least 21 days before term-end if it will not renew. That notice is a legal minimum, not a financing plan. At the end of the term the balance still has to be paid or replaced.
Why a bank non-renewal can create a private-lending problem
A mortgage term is a contract for a fixed period. Renewal is a new decision by the lender, not an automatic right. If this bank will not continue, the amount owing does not disappear. FCAC’s position is that when the term ends you have to pay the mortgage off in full or renew it. If this lender will not renew, “renew it” means with someone else, or the balance is due.
For federally regulated lenders, the 21-day rule lives in the Financial Consumer Protection Framework Regulations (sections 45 and 46). Twenty-one days is enough to read a letter. It is rarely enough to shop lenders, order an appraisal, clear title, and close. FCAC tells homeowners to start shopping a few months before term-end, not to wait for the letter. If the letter is a refusal, the calendar is already short.
This federal notice rule applies to federally regulated institutions. Ontario credit unions are provincially regulated. Do not assume the same 21-day disclosure applies to every lender you deal with. Ask that lender, in writing, what notice it will give.
If the balance is not paid at maturity, the mortgage can go into default under the contract. What happens next depends on the charge, the lender, and Ontario enforcement rules, including possible power of sale. That is a conversation with a real estate lawyer. Ignoring a non-renewal letter does not keep the old payment in place. Keep making the current payment until a new lender funds, unless your lawyer or the existing lender tells you otherwise in writing.
When another bank or a B lender may still be possible
Private mortgage lenders are not the only option after a decline. You do not have to stay with the same institution. FCAC says you can move the mortgage if another lender’s conditions suit you better. The new lender still has to approve the application and may use different criteria than the one that said no. None of this is a guaranteed approval.
For uninsured mortgages at federally regulated lenders, the Office of the Superintendent of Financial Institutions (OSFI) does not expect the minimum qualifying rate (the greater of the contract rate plus 2%, or 5.25%, as of OSFI’s 29 January 2026 page) to apply to an uninsured “straight switch” at renewal. That means moving from one federally regulated lender to another with no increase in remaining amortization and no increase in the loan amount, as OSFI set out in a 21 November 2024 announcement. Lenders are still expected to underwrite soundly under Guideline B-20. The exemption removes one prescribed test. It does not force a second bank to take a file the first bank refused.
Extra money, a longer amortization, or any refinance that changes the loan generally puts you back into ordinary origination, including the qualifying rate at a federally regulated lender. OSFI’s rule does not directly apply to provincially regulated Ontario credit unions; their qualification requirements depend on applicable provincial requirements and their own underwriting policies. Insured mortgages follow different insurance rules. Do not assume the switch exemption covers a credit-union move, a cash-out, or a file that is already in trouble.
Alternative (B) lenders sit between a conventional bank and a private mortgage. They still look at income, credit, and property, usually at a higher rate than a bank. For some declined renewals, a B lender is the whole solution. For others it is not, because the income cannot be documented the way those lenders require, the credit event is too recent, arrears are still open, or the property is outside what they will book. When conventional or B-lender options are unavailable or do not reasonably fit the borrower’s circumstances, a private mortgage may become one option to consider. Jumping to private because the letter was frightening is not a suitability test.
When a private mortgage lender may become an option
The Financial Services Regulatory Authority of Ontario (FSRA) treats private and alternative mortgages as a temporary option, often for one or two years, until you can qualify for a lower-cost product. FSRA notes that private lenders often lend against property value rather than income, that rates and fees are often higher than a traditional mortgage, and that many of these loans are interest-only.
That combination is why some Ontario homeowners look at private lenders after a bank non-renewal: the bank’s decision is about the current file, while a private lender may be willing to look first at equity and the property. Willingness to look is not an approval. Whether any private lender will fund depends on the property, the equity, the existing charges, the borrower’s circumstances, and that lender’s own criteria.
In Ontario, private or alternative mortgages must be arranged through a Level 2 mortgage agent or mortgage broker. Under the Mortgage Brokerages, Lenders and Administrators Act, 2006, a Level 1 mortgage agent may deal with traditional lenders such as banks and credit unions. Before you sign, that licensee must disclose material risks in writing and in plain language. Do not sign until you have had time to run the commitment past your own lawyer.
How private lenders typically assess equity and the property
Conventional underwriting starts with income, credit, and debt ratios, then the property. Many private lenders reverse that order. They ask what the home is worth, what already sits on title, and what combined loan-to-value would remain after the new charge and fees. Income and credit still matter to some private lenders; they are often not the same tests a bank uses.
Equity is not a round number you can guess from a 2021 assessment. A current appraisal, unpaid property taxes, condo arrears, a collateral charge that also secures a line of credit, and the cost of discharging the existing bank mortgage all change the picture. Combined loan-to-value on the day the private mortgage would fund is not always the number you had when the bank first lent.
The figures below are a hypothetical example to show the arithmetic. They are not an offer, a quote, or a statement of what any lender will approve.
Imagine an Ontario home worth $700,000 today, with a bank mortgage of $420,000 coming due and a $15,000 HELOC on the same collateral charge. Combined debt is $435,000. Combined loan-to-value is $435,000 ÷ $700,000 = about 62% before fees. Paying out both the mortgage and the HELOC with a new private first would still have to cover legal costs, any lender or broker fees that are added to the loan, and a current appraisal. Those items can push the ratio higher. A private lender may decline, cap the loan, or require a different structure. Sixty-two percent on paper is not a pass.
Private first mortgages and private second mortgages
If the bank mortgage is the only charge and it must be paid out at maturity, the private product under discussion is often a private first mortgage: a new first charge that retires the bank. That is a full replacement of the existing loan, not a small add-on.
A private second mortgage sits behind a first charge that remains in place. After a bank non-renewal, a second is only relevant if something else can stay as the first—for example if another institutional lender takes over the first and a private second is used for a shortfall, or if the problem is a smaller second-position debt rather than the whole bank balance. If the bank is demanding a full payout and no new first is in place, a second mortgage does not, by itself, pay out a first-ranking bank charge.
Which structure, if any, is suitable depends on title, the existing lender’s requirements, and whether a new first is even available. A licensed broker has to look at the actual charges. Do not assume a second mortgage is a shortcut around a first-mortgage payout.
Rates, fees, interest-only payments, and the short term
FSRA is direct: rates and fees on private and alternative mortgages are often higher than on a traditional mortgage, and in many cases you pay only the interest, so you are paying for the use of the money rather than reducing the principal. Twelve or twenty-four months later, the balance can still be the amount that funded. If fees were added to the loan and the property has not risen in value, loan-to-value can be no better—or worse—than when you started.
Private mortgages are typically short-term. FSRA describes them as a temporary option, often for one or two years. Treating a one- or two-year private charge as a five-year home loan is the mismatch FSRA is trying to prevent. Renewal with the same private lender is a new decision, not an automatic right, and it may come with a new rate, new fees, and a new appraisal.
Ask, in writing, what the payment is made of, whether principal payments are allowed and on what terms, which fees apply now, at discharge, and at a possible private renewal, and whether any fee will be added to the loan amount.
A realistic exit strategy is part of the private mortgage
FSRA expects a realistic exit strategy: a plan to qualify for more affordable financing when the private term ends, not a hope that rates fall or that income will double in six months. An exit that depends on a result you cannot control is not an exit strategy.
After a bank non-renewal, the exit is often the point of the private mortgage: buy enough time to repair income documentation, credit, arrears, or the property so a conventional or B lender might consider the file later. That is a plan, not a promise. Self-employed borrowers repairing an income package after a decline can start with private mortgage lenders for self-employed Ontario homeowners.
If the file is heading private, FSRA’s questions still apply: why not a traditional lender; what happens if you are late, including how quickly power of sale can begin; whether this lender will offer a renewal if you still cannot qualify; and what the written exit is if the first plan fails. None of this guarantees approval.
Risks and suitability
A private mortgage can be the wrong product even when a bank has said no. Higher cost, interest-only payments, short terms, fees that may be added to the loan, and enforcement rights if you miss payments are all reasons FSRA tells borrowers to slow down and read the commitment. Power of sale and other remedies are real. Suitability depends on the borrower, the property, the existing charges, and whether there is a credible path off the private loan before that term ends.
Get the bank’s reason in writing, with the maturity date, outstanding balance, per diem interest, and whether the charge is standard or collateral. Bring that, and a credit report, to a Level 2 mortgage agent or mortgage broker. Ask whether another bank or a B lender is still realistic before anyone structures a private first. If a private mortgage is even on the table, treat it as a short bridge with an exit, not as the end of the story.
What to do next
Want to discuss private mortgage options if your bank will not renew? Call Victor at 416-895-6074 or email victor@bestrefinance.ca.