Private Mortgages Explained: Help Clients Avoid Overpaying on Private Loans

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.

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