Using a Private Mortgage as a Bridge: The Exit Strategy Back to an A Lender
Private mortgages get a bad reputation, usually from people who used one without a plan to get out. Used correctly, a private mortgage is one of the most useful tools in the business. It solves a short-term problem fast, and then you exit back to a bank. The secret is that the exit strategy matters more than the loan itself.
What a private mortgage is actually for
Private lenders focus mainly on the property and your equity rather than your income or credit score. That makes them fast and flexible, which is exactly what you need when you’re dealing with a time-sensitive purchase, a credit event, a tax arrear, or an income situation the banks can’t underwrite yet. Rates and fees are higher because the lender is taking on more risk and moving quickly.
Why the exit is the whole point
A private mortgage is almost always a one-year, interest-only term. It is not meant to be held for a decade. The plan from day one is to fix whatever kept you out of an A or B lender, then refinance into cheaper financing before or at the end of that term.
What a clean exit looks like
Over that year, we work on the specific thing that needs fixing: rebuilding credit, getting another year of self-employed income on the books, clearing an arrear, or seasoning the file. When the term ends, you refinance into a B or A lender at a much lower rate, and the private mortgage has done its job.
The bottom line
A private mortgage is a bridge between where you are and where you’re trying to get. The people who get burned are the ones who cross it without knowing what’s on the other side. Before I ever recommend one, we build the exit first.
Need a short-term solution?
Let’s build the plan now, including the exit. A private mortgage done right is a stepping stone, and I’ll map the whole route for you.
Tyler Salmon, Mortgage Agent Level 2 (Licence #M21003803) · Tango Ontario (FSRA #13691)
