Private Mortgages Explained: Help Clients Avoid Overpaying on Private Loans
In this episode, Scott Dillingham reveals how private mortgage pricing actually works in Canada, how to compare lenders, and the exit strategy every client should have before they sign. Scott breaks down why rate and…
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Show notes
Private mortgages can save a deal — but they can also cost your client tens of thousands in unnecessary fees and rates. In this episode, Scott Dillingham reveals how private mortgage pricing actually works in Canada, how to compare lenders, and the exit strategy every client should have before they sign.
Scott breaks down why rate and term should matter just as much as simply getting an approval. When a borrower is placed into a high-rate, interest-only private mortgage, they may build little to no equity during the loan term. This can become a serious problem if the property is meant to be a temporary stepping stone — a common scenario for first-time buyers or clients relocating between provinces. If there's no equity growth and the client needs to sell, the realtor's ability to close a future transaction is also compromised. By advocating for better private lending terms, realtors can protect their clients' financial positions and strengthen their own reputations.
The episode highlights several creative uses of private lending that go beyond the typical bad credit scenario. One powerful strategy involves clients relocating from one province to another who haven't yet secured employment. Using tools like Glassdoor and AI-based income research, brokers can estimate a realistic salary based on the client's profession in the new market and structure a private mortgage around that figure. Once the client lands a job, the private loan transitions to a conventional mortgage — a seamless and safe approach. Bridge financing is another major use case. When a client wants to buy a new home before selling their current one, a private blanket loan or bridge loan can cover both properties temporarily, giving the homeowner time to sell without the pressure of carrying two traditional mortgages.
Scott also discusses renovation financing for investors who need capital to improve a property before refinancing, as well as helping homeowners who've been laid off and need short-term financial support while they secure new employment. In every scenario, the key principle remains the same: always plan the exit strategy. A responsible mortgage broker evaluates whether the client can realistically transition from a private loan back to a traditional lender. Scott emphasizes that LendCity never sets clients up for failure, even if it means declining a deal — as he shares the example of turning down a client with a large down payment who simply couldn't afford the ongoing payments. The client's realtor fully supported that decision, understanding that protecting the buyer's financial health builds long-term trust and referrals.
On the topic of fees, Scott is transparent about LendCity's approach: a maximum broker fee of two percent on private deals, scaling down to as low as one percent depending on the loan size. He notes that some lenders pay the broker directly, which can reduce or eliminate the borrower's fee entirely. This stands in contrast to brokers who exploit the private lending space with inflated fees, knowing the client has limited options. For realtors looking to differentiate themselves and provide genuine value to their clients, partnering with a broker who prioritizes rate shopping, transparent fees, and clear exit planning is a significant competitive advantage.
Key Takeaways
- Shop Around for Private Mortgage Rates: The average private lending rate in Canada sits between nine and twelve percent, but competitive options can be found as low as 5.99% on first mortgages — working with a broker who actively shops multiple lenders can save your clients thousands.
- Rate and Term Matter as Much as Approval: Getting a client approved at any cost can backfire if high interest rates and interest-only payments erode their equity position, limiting future selling and refinancing options.
- Creative Private Lending for Relocations: Clients moving between provinces can secure a private mortgage based on estimated income in their new market, then transition to a conventional lender once employment is confirmed.
- Bridge Loans Keep Deals Moving: Private bridge financing or blanket loans allow homeowners to purchase a new property before selling their current one, avoiding the stress of carrying two traditional mortgages simultaneously.
- Always Plan the Exit Strategy: A responsible broker ensures every private mortgage has a clear path back to conventional lending — whether that means improving credit, filing two years of strong tax returns, or waiting for employment verification.
- Transparent Broker Fees Build Trust: LendCity caps broker fees at two percent on private deals and reduces or eliminates them when the lender pays a finder's fee, unlike brokers who exploit clients' limited options with inflated charges.
Links to Show References
- LendCity Mortgages (Book a Call for Private Lending): lendcity.ca
- Financial Services Regulatory Authority of Ontario (FSRA) – Private Mortgage Consumer Guide: fsrao.ca/privatemortgage
- Glassdoor Canada – Salary Research Tool: glassdoor.ca
- (00:00) - – Introduction to Private Lending in Canada
- (01:15) - – Why Many Brokers Take the Path of Least Resistance
- (02:02) - – Why Rate and Term Should Match Approval as Top Priority
- (02:30) - – How Low Private Mortgage Rates Can Actually Go
- (03:32) - – How Overpaying on Private Loans Hurts Realtors Too
- (04:06) - – Provincial Coverage and Shopping for the Best Deal
- (05:29) - – Creative Use: Private Mortgages for Provincial Relocation
- (06:16) - – Using Income Research Tools to Structure Safe Approvals
- (06:44) - – Bridge Loans and Blanket Loans Explained
- (07:35) - – Renovation Financing and Other Private Lending Scenarios
- (08:15) - – Why LendCity Always Plans the Exit Strategy
- (08:57) - – Transparent Broker Fees: What LendCity Charges
Realtor questions from this episode
Why do clients overpay on private mortgages?
Scott says many brokers take the path of least resistance and call the one private lender they know will approve the file, treating approval as the only criterion. He argues rate and term should matter just as much, and that overpaying hurts a client's equity and their ability to sell later.
What exit strategy should a client have with a private loan?
Scott says they always look at the exit. Private loans are meant to be temporary, for example a client moving provinces before securing a job, or a bridge loan or blanket loan covering two properties while the old home sells, and then the client moves to a regular lender.
What does Scott say LendCity charges on a private loan?
Scott says the maximum LendCity charges is 2%, going as low as 1% depending on loan size, and that if the lender pays LendCity the fee is reduced or removed. He adds that the lenders have their own fees.
Transcript
Transcript of the episode as recorded. Rates, fees and program details are as stated on the recording date and may have changed.
Welcome to the Close More Deals podcast.
Welcome to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm gonna be talking to you about private lending. Now most people know what private lending is, however, there are a lot of sharks out there, and I'm gonna show you guys ways on how to maximize this for your clients based on due diligence on the back end, and as well as some creative ways that we've used private lending to help a client get approved for their loans. So with private lending, what I have found is a lot of people, and listen, this is everybody in the world, including maybe even you, and if it's you, not trying to offend you, but it's true.
People are lazy, Not everybody, right, but over time, right, you look at civilization, back in the day, everything was done by hand, right? Empires were built by hand. Everybody's working, everybody's moving. Now with technology and AI and all these other things, like, we we don't do nearly the same as what we used to, and we love TV, entertainment, cell phones, scrolling on social media. You know what I mean? So my point is is we're kinda lazy. Like, really, if we think about it.
Or or or maybe the better term is we enjoy leisure time too much. So anyways, I wanna paint that picture because what happens is brokers are the same way. So the goal is to get the client approved for the mortgage. So quite often, whenever we hear of a client needing a private lender, brokers generally will go, and this is not all brokers, but they generally will go with the path of least resistance, and they'll just call up the lender that they know will get the job done.
That is sort of what we are trained for is is to optimize and find the best lender for the client. Now the thing is, is they're placing getting the approval as the number one criteria, which is super super important, but matched up to that should be rate and term, and that's how we do it. So it's drastically different. We see it all the time where clients are coming to us with approvals on a first mortgage from anywhere from nine to 12%, which is like the average in the private lending market.
So I'm not saying like that's crazy, but, like, we're we're getting…
So I'm not saying like that's crazy, but, like, we're we're getting loans done at 5.99 and, like like, low fees, like so what I'm trying to say here is there's lenders that have better pricing that are out there, and a lot of brokers are lazy, so they're not looking for that. They're just going to that one, oh, you need a private lender? Okay. Here you go. And, it helps your client, but it also doesn't help your client because if they're paying too much into the deal, it can really hinder their equity position, which might also reduce their ability to sell in the future.
Right? Like, maybe this is a temporary home for them just to get something now, and it happens all the time. I'll give you some examples, like I said, in a second, but where this is just something temporary, they just wanted to get into the market, but if the terms are too high and then you go to sell, right, and there's no equity because they were in an interest only mortgage or the payments were too high that they couldn't pay anything down, Do you know what I mean?
It puts you in a spot, it actually hinders you as a REALTOR®, it hinders your ability to sell and to help your clients the very best. And even if it doesn't result in a better sale, imagine being the REALTOR® that, hey, you know what, the average interest rate in Canada for private lending is nine to 12 and I got you six by making a recommendation to you, you know what I mean? That's fantastic. Now again, I'm recording this early February twenty twenty six, rates change all the time, but this is a program that's been out for at least a year at this rate.
So it is for an Ontario and an Alberta based lender. There's probably other lenders that are even cheaper, you know, in different niche markets. I'm not sure, do try to match up with lenders that have a wide area of coverage because we we lend all over the place, but the point is, is we will continue to shop around, so if there's a file in a new location, we will always check and see what we can find, but the point here is to get your client the best deal.
Now here's some cases that we've done.
Now here's some cases that we've done. So a lot of people think, oh, I have bad credit, I need a private lender. That's one way, but that might not be to the client's best interest. We declined a client the other day, she had a large down payment, she wanted to buy her own home because she's getting into a fight with her family and she lives with them and wants to move out and we told her no because she doesn't have the money to pay it, do you know what I mean?
Like, so we do look at those things and I realize from the REALTOR® standpoint, you might say, oh, well, sucks, know, I could have got a sale, you know, but this client's REALTOR® was a 100% on board. They're like, I agree, we don't wanna set a client up for failure, I don't want that on my name, right? So that is one way that we we do it, but another way is, like, say a client is moving from one province to another province, and they haven't lined up their job yet, but we know based on their previous job, a ballpark of the income that they can get once they secure a job, we will then give them a private loan up to what those amounts should be.
There's different tools that you can check for the average income, like Glassdoor, even some AI tools, you can have them research and say, hey, what's, you know, the income in this area? And it will research and pull in sources for you. So you can kind of see, so we set clients up that way safely, right? We don't just let them buy whatever they want, we like say, okay, well, is what, you know, let's say a nurse, right? Maybe a nurse in Alberta makes more than a nurse in Saskatchewan, just making this up, right?
So let's say they're moving to Saskatchewan, we're going to find out what nurses make there, and that income is what we'll use on the application, and we'll find out their max approval, and then we'll get them the private loan. Now the private loan is only temporary until they do get employment, and then we're going to switch to a regular lender. So that has been a fantastic one. Bridge loans has been another one, so say a client is selling their home and they wanna buy another home, they have a lot of equity in the home, but the market's a little slower, so they haven't sold it yet, we'll do a blanket loan or a bridge loan with a private lender, it covers both properties they can buy, and then it gives them that window to sell, and once they sell and pay off that private loan, we'll then replace that with a regular traditional lender, because the banks are not gonna do stuff like this and sometimes the client, because what a bank could do, the bank could refinance the existing home and then give them the loan on the new home, but what if they don't qualify for both homes, right?
Like what if their max budget only supports one home?
Like what if their max budget only supports one home? That's where we like to use private lending, do you know what I mean? So we try to use it in those creative scenarios, maybe an investor's trying to renovate a property that needs a lot of work, We'll tap into this as opposed to, oh, you know, you're losing your house, let's get this set up and which sometimes that is a viable option, right? Like if someone's been laid off and they're reapplying for a job, that can help too.
Just there's all these different scenarios, but my point of all of this, and what I want you guys to know is that we do always look at the exit, and we do always look at who can give your client the best rate. So by working with us, details in the show notes, book a call, by working with us, we're not gonna set your client up for failure. Do you know what I mean? So it's gonna keep you having a good name with your customer, and we're gonna do everything we can to obviously get it approved and just make it work and save them the most money at the same time.
So we we we make you look like an hero in this case. Right? It's not these ridiculous interest rates that we hear from brokers all the time or brokers charging these crazy fees because they know a private loan is the only option for the client, so they're just ridiculous in pricing. We don't do that either. I mean, our max that we charge is 2%, depending on the loan size will go down as low as one on a private loan. That's what we do.
I'm putting it out there, right, just so you know. The lenders have their own fee, sometimes they pay us, sometimes they don't. If they pay us, you know, we reduce our fee or it's not even there, right, because we're getting it from the lender. So we yeah. It's there's all these different options, but that's kinda where we are. Wanted to shed this share this with you. I hope it was valuable, and if you liked it, please share it with a friend. Look forward to seeing you next week. Take care.