Understanding Private Mortgage Investment
Private mortgage investing involves lending money secured by real property. This page explains how it works, how returns are structured, and what the risks are. Read carefully before proceeding.
Important Risk Notice
Private mortgage lending involves risk, including potential loss of principal. Past performance is not indicative of future results. Prospective lenders and investors should conduct independent due diligence and seek professional advice. This page is for educational purposes only and does not constitute investment advice, a solicitation to invest, or a guarantee of any return.
Fundamentals
What is private mortgage investing?
Private mortgage investing means acting as the lender in a mortgage transaction — providing capital to a borrower, secured by a registered charge on their property.
Secured by real property
Private mortgage investments are secured by a registered charge against Ontario real property. The property serves as collateral for the loan.
Interest-based returns
Investors typically receive periodic interest payments. The principal is repaid at maturity or upon refinancing or sale of the property.
Short-term instruments
Most private mortgages run for 6–24 months. They are designed as bridge solutions, not long-term holds.
Priority position matters
Mortgages are registered in priority order. First mortgages have the strongest security position; second mortgages have higher risk but may offer different return profiles.
Return structure
How returns are structured in private mortgage investing
Understanding the mechanics of how money moves in a private mortgage deal is essential before committing capital.
Interest payments
Investors receive interest on the outstanding principal, typically monthly. Rates vary based on deal risk, LTV, borrower profile, and security position.
Term structure
The mortgage term defines the agreed lending period. The borrower must repay or refinance by maturity. Extensions may be negotiated but are not guaranteed.
Security position
Your position in the mortgage priority stack determines recovery order in the event of default. First mortgage holders are paid before second mortgage holders.
No equity participation
Private mortgage investors receive only the agreed interest. There is no upside participation in property appreciation — returns are fixed by the mortgage terms.
What private mortgage investing is not
Not a guaranteed investment — capital can be lost
Not insured by CDIC or any government body
Not equivalent to a GIC or savings account
Not a liquid investment — funds are committed for the term
Not an equity stake — no participation in property appreciation
Not suitable for all investors — independent advice is recommended
All mortgage transactions are subject to lender approval, satisfactory appraisal, and legal review. Past results do not guarantee future outcomes.
Risk assessment
Understanding the risks
Private mortgage investing carries meaningful risks. These are not theoretical — they represent real outcomes that have affected real investors. Read each carefully.
Borrower Default
A borrower may miss payments or fail to repay at maturity. Recovery requires power of sale or foreclosure proceedings, which take time and incur legal and carrying costs.
Repayment Delays
Even willing borrowers may need more time than anticipated to sell or refinance. Delays extend the investment period beyond the original term without guaranteed additional return.
Property Value Decline
If the property value falls below the outstanding mortgage balance, the security may be insufficient to recover the full investment after enforcement costs.
Illiquidity
Mortgage investments cannot typically be sold or transferred without borrower and legal involvement. Your capital is committed for the term and may be extended during enforcement.
Legal and Title Risk
Undiscovered title issues, errors in mortgage documentation, or competing claims can complicate enforcement. Proper legal review and title insurance reduce but do not eliminate this risk.
Concentration Risk
Investing in a single mortgage concentrates exposure to one property, one borrower, and one market. Loss of a single investment has full impact with no diversification offset.
Deal structure
How private mortgage deals are structured
The legal and financial structure of a private mortgage determines both your security and your rights if something goes wrong.
First vs. Second Position
First Mortgage
Highest priority claim on the property. In a power of sale, the first mortgagee is paid before other claimants. Typically lower LTV and lower risk profile relative to the property value.
Second Mortgage
Paid after the first mortgage holder in any enforcement action. Higher risk because recovery depends on remaining equity after the first mortgage is satisfied. Investors must understand the combined LTV when evaluating second mortgages.
Legal Protections
Registered charge on title
The mortgage is registered against the property in Ontario's land registry. This establishes your legal claim against the asset.
Mortgage terms
The mortgage document specifies interest rate, payment schedule, maturity date, default provisions, and enforcement rights.
Title insurance
Title insurance protects against title defects and certain fraud risks. It is standard practice but has coverage limitations.
Independent legal advice
You should retain your own solicitor to review and protect your interests. Do not rely solely on the borrower's legal counsel.
Due diligence
What investors should evaluate before funding
No one should commit capital to a private mortgage without conducting their own due diligence. This framework outlines the minimum considerations.
Review the appraisal
Understand how the property was valued, by whom, and on what date. Consider whether the value is supported and whether market conditions have changed.
Assess the LTV
Loan-to-value ratio is the primary protection. Understand the total debt secured against the property — not just the proposed mortgage — relative to the appraised value.
Evaluate the exit strategy
How will the borrower repay? Is the exit plan realistic given their situation, property type, and current market conditions? What happens if the primary exit fails?
Engage independent legal counsel
Use a solicitor experienced in Ontario mortgage law to review the mortgage terms, registration, and your rights as a mortgagee before funding.
Understand the deal structure
What priority is the mortgage? What fees are being charged? What is the interest rate and how is it paid? What happens if the borrower defaults?
Assess your risk tolerance
Private mortgage investing is not suitable for all investors. Consider whether you can afford to lose the invested capital, and how this fits your broader financial position.
Our role
How this brokerage facilitates transactions
Understanding what we do — and what we do not do — is important context for any prospective lending partner or investor.
We source and screen mortgage opportunities on behalf of borrowers.
We present qualified deals to lending partners with documentation packages.
We coordinate the transaction logistics — appraisal, legal, disbursement.
We are a licensed mortgage brokerage, not an investment advisor or fund manager.
We do not guarantee any return, outcome, or performance of any transaction.
Our obligation is to facilitate compliant, documented mortgage transactions under FSRA licensing.
Regulatory context
This brokerage is licensed by FSRA (Financial Services Regulatory Authority of Ontario) as a mortgage brokerage. Our license authorizes us to facilitate mortgage transactions — not to provide investment advice or manage investment funds.
If you are evaluating whether private mortgage investing is appropriate for your financial situation, consult a registered financial advisor or portfolio manager, not a mortgage broker.
For information on FSRA licensing and regulated financial services in Ontario, visit fsrao.ca.
Risk Disclosure
Private mortgage lending involves risk, including potential loss of principal. Past performance is not indicative of future results. Prospective lenders and investors should conduct independent due diligence and seek professional advice. This content is for informational purposes only. Nothing on this page constitutes investment advice, a solicitation, or an offer to invest. Past performance of private mortgage investments is not indicative of future results. Seek independent legal and financial advice before making any investment decision.
Learn More About Opportunities
If you have reviewed this page and wish to discuss the types of deals we broker, we welcome a conversation. We will provide factual information about our process and current deal pipeline without obligation.
All prospective investors are strongly encouraged to seek independent legal and financial advice before committing capital.