Private mortgage investing allows individual investors to lend directly into mortgage transactions secured against Ontario real estate.
You review the mortgage, the property, the loan-to-value, your position on title and the repayment strategy before deciding whether an opportunity fits your objectives and risk tolerance.
RRSPTFSARegistered FundsCorporate FundsPersonal Capital
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Private Mortgage Investing Explained
Your investment capital may have
more options than you think.
Registered funds such as RRSPs and TFSAs may be eligible for certain private mortgage investments through an appropriate self-directed account structure. Personal and corporate capital may also be used for direct mortgage investing.
The key is not simply earning a higher interest rate.
It is understanding the mortgage you are funding, the real estate securing it, how much equity is behind your investment and how the borrower is expected to repay you.
Each mortgage opportunity should stand on its own. The purpose of underwriting is to understand what secures the loan, why the borrower needs the financing and how the mortgage is expected to be repaid.
01 · OPPORTUNITY
Review the mortgage
Consider the requested amount, rate, term, payment structure, mortgage position and purpose of the financing.
02 · PROPERTY
Establish the security
Review the appraisal, property type, location, value, marketability and existing secured debt.
03 · BORROWER
Understand the file
Review the borrower's income, credit, obligations, circumstances and reason private financing is required.
04 · DISCLOSURE
Understand the risks
Review the required investor or lender disclosure and supporting information before deciding whether to proceed.
05 · FUNDING
Complete the mortgage
If you choose to invest, legal documentation is completed and the mortgage is registered against the property.
How We Look at a Mortgage
The return matters.
The risk matters more.
A higher contractual interest rate does not automatically make a mortgage a better investment. The underwriting should explain why the return is appropriate for the risk being taken.
01 · LOAN-TO-VALUE
How much equity is behind the loan?
Total secured debt is compared with the appraised property value. The equity cushion is one of the most important parts of the risk assessment.
02 · MORTGAGE POSITION
Where are you on title?
A first mortgage has priority over later mortgage charges. A second mortgage sits behind the first and carries a different risk profile.
03 · PROPERTY
What actually secures the investment?
Location, marketability, condition, property type and appraisal quality all matter if the mortgage ever has to be enforced.
04 · BORROWER
Can the mortgage be serviced?
Income, credit history, existing obligations and the circumstances behind the financing help explain repayment risk.
05 · EXIT STRATEGY
How is your principal expected back?
Refinance, sale, maturity payout or another identifiable source should form a credible repayment strategy.
06 · TERMS & DOCUMENTS
Know exactly what you are funding
Rate, term, payments, fees, prepayment provisions, renewal conditions and legal documentation should be understood before funding.
First vs. Second Mortgages
Mortgage position changes
the risk profile.
First Mortgage Position
The first registered mortgage has priority over subsequent mortgage charges. That priority can materially affect recovery if a borrower defaults and the property must be sold.
✓First mortgage charge has priority over later mortgage charges.
✓Loan-to-value should still be assessed against a realistic property value.
✓Default, enforcement, market and liquidity risks still exist.
Second Mortgage Position
A second mortgage is registered behind the first mortgage. The amount owing ahead of your investment becomes central to assessing the remaining equity.
→Combined loan-to-value matters, not simply the size of the second mortgage.
→Recovery is subordinate to the first mortgage lender.
→Higher contractual interest can reflect higher risk. It does not eliminate that risk.
Ways Investment Capital May Be Held
Registered and non-registered
capital may be used.
Private mortgage investing is not limited to cash sitting in a personal investment account. Depending on the investment and applicable account rules, registered plans and other forms of capital may also be used.
RRSP
Retirement funds
Certain mortgage investments may qualify to be held through a self-directed RRSP when the applicable investment and trustee requirements are satisfied.
TFSA
Tax-free account
Eligible mortgage investments may potentially be held through a self-directed TFSA, subject to applicable rules and trustee requirements.
LIRA / RRIF
Registered retirement accounts
Eligibility depends on the account, investment structure and the institution acting as trustee or administrator.
CORPORATE / PERSONAL
Non-registered capital
Personal or corporate investment capital may also be used for direct mortgage lending where the transaction and investor suitability support it.
Registered-plan administration
Where an eligible mortgage investment is being held through a registered plan, a qualified self-directed account trustee or administrator is required. Investment eligibility, account setup, trustee requirements and fees must be confirmed for the specific account and transaction.
Registered-account eligibility and tax treatment should be confirmed with the applicable plan administrator and independent tax adviser where appropriate.
Understanding the Risks
Real estate security does not mean
risk-free.
Mortgage investments are not guaranteed. A registered mortgage provides security against property, but investors can still experience payment interruptions, enforcement costs, delays and loss of principal.
DEFAULT RISK
The borrower may stop paying
Missed payments can require collection or enforcement and may interrupt expected investment income.
PROPERTY VALUE RISK
Property values can decline
An appraisal is an opinion of value at a point in time. Actual sale proceeds can be lower, particularly under forced-sale conditions.
LIQUIDITY RISK
Your capital may be committed
A mortgage is not a savings account. Principal may not be readily available before repayment or maturity.
ENFORCEMENT RISK
Recovery costs money and takes time
Legal fees, property expenses, arrears and other enforcement costs can affect the amount ultimately recovered.
PRIORITY RISK
Other claims may rank ahead
Mortgage position and other claims against the property affect where an investor stands if enforcement becomes necessary.
REINVESTMENT RISK
A mortgage may repay early
When principal is returned, another suitable mortgage opportunity may not immediately be available on similar terms.
Illustrative Mortgage Opportunities
Look past the headline rate.
Read the whole file.
These examples are purely illustrative and are not current investment offerings. They demonstrate some of the information an investor should consider.
Illustrative First Mortgage
Property value$900,000
Mortgage amount$540,000
Loan-to-value60%
PositionFirst
PurposeShort-term refinance
A lower LTV and first-position priority may provide a stronger equity position, but the borrower, property, repayment plan and all other risks still require review.
Illustrative Second Mortgage
Property value$900,000
Existing first mortgage$500,000
Proposed second mortgage$130,000
Combined LTV70%
PositionSecond
Equity remains behind the combined mortgage debt, but the first mortgage lender has priority. That distinction materially changes the risk.
Investor Questions
Understand the investment
before you fund it.
No. Mortgage investments involve risk. A mortgage is secured against real property, but default, property-value, liquidity, priority and enforcement risks can affect both income and principal.
It means the mortgage is registered as a charge against the property. Mortgage position, prior secured debt, property value and other claims affect the strength of that security.
Certain mortgage investments may be eligible for registered accounts when applicable investment and trustee requirements are satisfied. The specific investment and account structure must be reviewed before funds are committed.
Yes, personal or corporate capital may be used for direct mortgage investing where the transaction structure and investor suitability support it.
The information depends on the transaction, but can include the property appraisal, mortgage amount, loan-to-value, mortgage position, borrower information, credit, income, existing secured debt, purpose of the financing, exit strategy and required investor disclosure.
Collection or enforcement may become necessary. The process can take time and involve legal and property-related costs. Recovery depends on mortgage priority, property value, sale proceeds and other claims or expenses.
Borrowers use private mortgages for many reasons, including credit issues, unconventional income, mortgage arrears, debt consolidation, time-sensitive financing, unusual properties or circumstances that do not fit institutional lending at that moment.
Not on that basis alone. A higher contractual interest rate may reflect higher risk. Loan-to-value, mortgage position, property quality, borrower circumstances, repayment strategy, term and enforcement considerations all matter.
Interested in Private Mortgage Investing?
Start with the type of mortgage risk
you are comfortable taking.
Tell us approximately how much you are considering investing, whether the capital is registered, corporate or personal, and what you are looking for from a mortgage investment. From there, we can explain how opportunities are evaluated and what information you should expect to review before making your own decision.
Important investor disclosure:
Mortgage investments involve risk and are not guaranteed. Property values can decline, borrowers can default, enforcement can be costly and time-consuming, and invested capital may not be liquid. A registered mortgage provides security against real estate but does not guarantee repayment of interest or principal. Every mortgage opportunity should be reviewed on its own facts together with the applicable disclosure documentation. Independent legal, tax and financial advice should be obtained where appropriate.
Private Mortgage Investing
Put your investment capital to work.
Secured by Ontario real estate.
Private mortgage investing gives individual investors the opportunity
to lend directly into mortgage transactions secured against real property.
Registered funds such as RRSPs, TFSAs, LIRAs and RRIFs may be used where
eligible, along with corporate and personal non-registered capital.
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Free Guide
Start with the guide.
Then talk numbers.
Before getting into loan-to-value ratios and mortgage positions,
flip through this practical guide to private mortgage investing
in Ontario — earn contract-based income backed by real estate,
explained in plain language.
What's Inside the Guide
✓
How private mortgage investing actually works, start to finish
✓
First vs. second mortgage positions, explained simply
✓
Which accounts (RRSP, TFSA, LIRA/RRIF, corporate) may be eligible
✓
The real risks to understand before you fund a mortgage
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Investing in Private Mortgages
How Private Mortgage Investing Works
You are the lender.
The property is the security.
Each mortgage opportunity is reviewed individually. The objective
is not simply to chase an interest rate. It is to understand the
property, the borrower, the equity, your mortgage position and how
your principal is expected to be repaid.
01 · OPPORTUNITY
Review the mortgage
Consider the mortgage amount, contractual rate, term,
position and purpose of the financing.
02 · PROPERTY
Establish the value
Review the appraisal, property type, location,
marketability and existing secured debt.
03 · BORROWER
Understand the file
Review income, credit, payment capacity, circumstances
and why private financing is required.
04 · DISCLOSURE
Review the risks
Review the required investor disclosure and supporting
information before deciding whether to fund.
05 · FUNDING
Mortgage closes
If you choose to proceed, legal documentation is completed
and the mortgage is registered against the property.
How We Look at a Mortgage
The rate matters.
The risk matters more.
A higher interest rate is not automatically a better investment.
The underwriting should explain why the return is appropriate for
the risk being taken.
01 · LOAN-TO-VALUE
How much equity is behind the loan?
Total secured debt is compared with the appraised property value.
Mortgage position matters when assessing the equity cushion.
02 · MORTGAGE POSITION
Where are you on title?
A first mortgage has priority over later charges. A second mortgage
sits behind the first and carries a different risk profile.
03 · PROPERTY
What actually secures the loan?
Location, condition, property type, marketability and appraisal
quality matter if enforcement ever becomes necessary.
04 · BORROWER
Can the mortgage be serviced?
Income, credit history, obligations and the circumstances behind
the financing help explain repayment risk.
05 · EXIT STRATEGY
How is principal expected back?
Refinance, sale, maturity payout or another identifiable source
should provide a credible repayment strategy.
06 · DOCUMENTATION
Know exactly what you are funding
Rate, term, payments, fees, prepayment terms, renewal provisions
and legal documentation should all be understood.
First vs. Second Mortgages
Mortgage position changes
the risk profile.
First Mortgage Position
A first registered mortgage has priority over subsequent
mortgage charges. That priority can materially affect recovery
if the borrower defaults and the property must be sold.
✓
First mortgage charge has priority over later mortgage charges.
✓
Loan-to-value should still be based on a realistic property value.
✓
Default, market, enforcement and liquidity risks still exist.
Second Mortgage Position
A second mortgage is registered behind the first. The amount
owing on the first mortgage is therefore central to evaluating
the second mortgage.
→
Combined loan-to-value matters, not simply the second mortgage amount.
→
The first lender has priority if enforcement occurs.
→
A higher contractual return can reflect higher risk.
Your Investment Capital
Registered and non-registered
funds may both be used.
Depending on eligibility and account structure, investors may
participate using registered retirement funds, corporate capital
or personal non-registered investment funds.
RRSP
Retirement funds
Certain mortgage investments may qualify to be held through a
self-directed registered plan where applicable requirements are met.
TFSA
Tax-free account
Eligible mortgage investments may be held through a self-directed
TFSA, subject to applicable rules and trustee requirements.
LIRA / RRIF
Retirement accounts
Eligibility and administration depend on the account, investment
structure and the institution acting as trustee.
CORPORATE / PERSONAL
Non-registered capital
Corporate or personal investment capital may also be used
for direct mortgage lending.
Registered-plan administration
Eligible registered-plan mortgage investments require an appropriate
self-directed trustee or administrator. Account eligibility,
administration and applicable fees remain subject to the trustee's
requirements and applicable registered-plan rules.
Understanding the Risks
Real estate security does not mean
risk-free.
Mortgage investments are not guaranteed. A registered mortgage
provides security against real property, but investors can still
experience defaults, delays, enforcement costs, loss of interest
and loss of principal.
DEFAULT RISK
The borrower may stop paying
Missed payments can interrupt expected cash flow and may
require collection or enforcement.
PROPERTY VALUE RISK
Property values can decline
An appraisal is an opinion of value. Actual sale proceeds
can be lower, especially in a forced-sale environment.
LIQUIDITY RISK
Your capital may be tied up
A mortgage may not be easily sold or repaid before maturity.
Repayment can also extend beyond the original term.
ENFORCEMENT RISK
Recovery takes time and money
Legal fees, property costs and other expenses can reduce
the amount ultimately recovered.
PRIORITY RISK
Other claims may rank ahead
Mortgage position and other claims against the property affect
where an investor stands if enforcement occurs.
REINVESTMENT RISK
A mortgage may repay early
When principal is returned, another suitable mortgage opportunity
may not immediately be available on comparable terms.
Illustrative Mortgage Opportunities
Look past the headline rate.
Read the whole file.
These examples are illustrative only and are not current investment
offerings. They show the type of information that should be considered
when evaluating a mortgage investment.
Illustrative First Mortgage
Property value$900,000
Mortgage amount$540,000
Loan-to-value60%
PositionFirst
PurposeShort-term refinance
Illustrative Second Mortgage
Property value$900,000
Existing first mortgage$500,000
Proposed second mortgage$130,000
Combined LTV70%
PositionSecond
Investor Questions
Understand the investment
before you fund it.
No. Mortgage investments involve risk and repayment of principal
or interest is not guaranteed.
It means the mortgage is registered as a charge against real
property. Mortgage position, existing secured debt, property
value and other claims affect the strength of that security.
Certain mortgage investments may be eligible for registered
accounts when applicable investment, tax and trustee requirements
are satisfied.
Yes. Private mortgage investments may also be funded using
non-registered personal or corporate investment capital,
subject to the transaction and investor suitability.
The lender may need to pursue collection or enforcement remedies.
Recovery depends on mortgage priority, property value, sale proceeds,
costs and other claims.
Borrowers may require private financing because of credit, income,
timing, property characteristics, mortgage arrears, debt consolidation
or other circumstances that do not fit conventional lending.
Interested in Private Mortgage Investing?
Start with the type of mortgage risk
you are comfortable taking.
Tell me approximately how much you are considering investing,
whether the funds are registered, corporate or personal, and what
you are looking for from the investment. From there we can discuss
how private mortgage opportunities are reviewed and what information
you should expect to see.
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Speak About Investing →
Important investor disclosure:
Mortgage investments involve risk and are not insured by a government
deposit insurer or investor protection fund. Returns and repayment of
principal are not guaranteed. Property values can decline, borrowers can
default, enforcement can be costly and time-consuming, and invested capital
may not be liquid. Each mortgage opportunity should be reviewed on its own
facts together with the required disclosure documentation. Investors should
obtain independent legal, tax and financial advice where appropriate.
