Overview
Private commercial mortgages in Canada are an alternative form of financing for those seeking to purchase, refinance, or develop commercial properties when traditional lenders—such as banks—are unable or unwilling to provide funding. These mortgages are funded by private individuals or investor groups, offering more flexible and expedited solutions, but typically at higher costs and shorter terms.
Key Features of Private Commercial Mortgages
- Lender Type: Funded by private individuals, investment groups, or specialized private lending firms rather than major banks.
- Speed & Flexibility: Faster approval and funding, with less stringent qualification requirements compared to traditional lenders.
- Interest Rates: Generally higher than bank rates, often prime plus 8% or more; rates start around 5.75% but can be significantly higher depending on risk and market conditions.
- Fees: Lender and broker fees are common, typically ranging from 1% to 5% of the loan amount.
- Loan Terms: Usually short-term, often under two years (many as short as 90 days to 24 months), designed as bridge or interim financing.
- Use Cases: Suited for acquisitions, refinancing, construction, or when waiting for longer-term approval. Frequently used for projects that traditional lenders consider too risky, such as independent hotels, restaurants, or properties with uncertain cash flow.
- Security: Loans are secured by the commercial real estate itself, sometimes requiring additional collateral or multiple properties to be pledged.
Types of Properties Financed
- Industrial buildings
- Office units
- Apartment buildings
- Shopping malls
- Mixed-use properties
- Retail plazas
- Hotels and hospitality venues
Comparison: Private vs. Bank Commercial Mortgages (Canada)
| Feature | Private Commercial Mortgage | Traditional Bank Commercial Mortgage |
|---|
| Approval Speed | Rapid (days to weeks) | Slow (weeks to months) |
| Qualification Criteria | Flexible, less documentation | Strict, extensive documentation |
| Interest Rates | Higher (Prime + 8% or more) | Lower, can be sub-6% for top borrowers |
| Fees | 1–5% of loan amount, often up front | Lower, sometimes waived |
| Typical Terms | Short (3–24 months) | Medium to long (3–10+ years) |
| Use Cases | Bridge, construction, "risky" ventures | Stable cash flow, established businesses |
| Collateral Requirements | Can require multiple properties | Generally the subject property |
| Credit Score Requirements | Lenient, sometimes no check | Rigid, strong credit needed |
Regional and Provincial Considerations
- Availability: Private commercial lenders operate across Canada, with notable activity in Ontario, British Columbia, Alberta, and Atlantic Canada.
- Provincial Regulation: Mortgage brokering and private lending are regulated at the provincial level. Requirements for lender registration, disclosure, and borrower protection vary by province; always verify the licensing of lenders and brokers.
Application Process & Documentation
- Streamlined Application: Minimal paperwork and often no income or credit check required for initial approval.
- Typical Documentation: Property appraisal, purchase agreement, and proof of ownership; additional documents may be requested depending on lender and property type.
- Collateral: Property being financed is used as security; additional assets may be required for higher-risk deals.
Actionable Next Steps
- Rate Shopping & Comparison: Use comprehensive Canadian mortgage comparison platforms like theratefinder to find and compare private commercial mortgage rates and lender options. They streamline the application process for residential, commercial, and construction loans, and connect you with top Canadian lenders.
- Personalized Application: For a tailored solution, start your application with theratefinder at theratefinder.ca/onboarding.
- Broker Consultation: Engage a mortgage broker with experience in private commercial lending to help navigate lender requirements, negotiate terms, and ensure regulatory compliance.
- Due Diligence: Always verify lender credentials and fully review all terms, fees, and repayment conditions before proceeding.
Summary
Private commercial mortgages in Canada offer flexible, fast, and accessible financing for commercial real estate, especially when traditional bank funding is unavailable or too slow. They come at higher rates and fees, are typically short-term, and are suitable for more complex or riskier scenarios. To secure the most competitive rates and terms, leverage trusted platforms like theratefinder and consult an experienced commercial mortgage broker.