What to Look For When Getting a Private Mortgage in BC: A Borrower's Checklist
November 1, 2025 | Posted by: Alex Vinarski
What to Look For When Getting a Private Mortgage in BC: A Borrower's Checklist
A private mortgage can be a financial lifeline, providing fast access to funds when traditional banks can't help. However, not all private mortgages are created equal. As a borrower, it's crucial to look beyond just the interest rate to ensure you're entering a fair and manageable agreement.
As a mortgage broker who specializes in private lending, I help clients navigate these waters every day. Here are the key factors you must consider before signing for a private mortgage in British Columbia.
1. The True Cost: Look Beyond the Interest Rate
While the interest rate is important, it's only one part of the cost equation. You need a clear picture of the total cost of borrowing.
-
Lender/Broker Fees: These are typically one-time fees paid at closing.
-
1st Mortgage: Expect fees around 2% of the loan amount.
-
2nd Mortgage: Fees are typically higher, around 3-4%.
-
-
Other Costs: Budget for third-party costs like an appraisal and legal fees for the lawyer who registers the mortgage. Some lenders also charge administration or documentation fee.
The Bottom Line: Ask for the complete breakdown of all fees in writing before you proceed.
2. The Fine Print: Understand the Terms & Conditions
The term sheet or commitment letter outlines the rules of your loan. Pay close attention to these details:
-
Is it Open or Closed? An open mortgage allows you to repay the entire loan at any time without penalty. A closed mortgage locks you in for the term, and breaking it can result in a significant penalty. Most private mortgages are open or have very mild prepayment penalties—this is a key benefit. Some lenders even allow partial pre payments.
-
What is the Amortization? This is the total length of time you'd take to pay off the loan (e.g., 25 years). Most private mortgages have interest only payments. However, the...
-
...Term is Critical. This is the actual length of your contract, usually 1 to 3 years. At the end of the term, the entire balance becomes due, and you must either repay it, renew the mortgage, or arrange new financing.
3. The Renewal: Plan for Your Exit Strategy
A private mortgage is a short-term solution. The most important question to ask is: 'What is my exit strategy?'
-
Renewal Fees: Some lenders charge a fee to renew the mortgage for another term. Ask if this fee is a flat rate (e.g., $250) or a percentage of the loan.
-
Potential for Rate Hikes: Can the lender increase your interest rate at renewal? Get clarity on this upfront.
Your goal should be to use the private mortgage to solve your immediate problem, then improve your financial situation to refinance with a traditional 'A' or 'B' lender at a lower rate when the term ends.
4. The Lender's Reliability
You're not just borrowing money; you're entering a business relationship.
-
Is the lender an individual or a corporation? Mortgage Investment Corporations (MICs) are often more stable as they are structured for long-term lending.
-
What is their reputation? A good broker (like me) vets lenders and only works with reputable, professional partners.
5. The Right Professional Advice: Work with a Broker
Navigating the private lending landscape alone is risky. A qualified mortgage broker provides immense value by:
-
Shopping Multiple Lenders: We negotiate on your behalf to find the best combination of rate and terms from our network of trusted lenders.
-
Translating the Jargon: We explain the fine print in plain language so you know exactly what you're signing.
-
Ensuring a Fair Deal: We act as your advocate, ensuring the terms are reasonable and the lender is reputable.
Your Private Mortgage Checklist
Before you commit, ensure you can answer 'YES' to these questions:
✅ Have I received a full, written breakdown of all interest and fees?
✅ Do I understand if the mortgage is open or closed?
✅ Do I have a clear, realistic exit strategy for when the term ends?
✅ Do I know what the renewal fees and potential rate changes are?
✅ Am I working with an experienced broker who has explained all the terms clearly?
The Smart Path to a Private Mortgage
A private mortgage is a powerful tool when used correctly. By focusing on the total cost, understanding the terms, and having a solid exit plan, you can leverage private financing to achieve your goals without undue financial stress.
Don't navigate the private lending market alone. As your broker, my role is to ensure you get a fair, transparent, and suitable mortgage that serves as a bridge to a stronger financial future.
Ready to explore your private mortgage options with confidence? Contact me today for a straightforward, no-obligation consultation.
More information on private mortgages here: https://www.ipotekacanada.com/index.php/private-mortgages
