When private lending actually makes sense for a client.

Four situations come up repeatedly. A short closing window where a conventional approval can't move fast enough — a bridge between a firm sale and a firm purchase, or a deal that collapses without funds in days, not weeks. Self-employed or commission income that's real but not yet provable the way an A or B lender needs it — a first full tax year in a new structure, for instance, where the client's bank statements tell a stronger story than their notices of assessment do. A credit event, like a discharged bankruptcy or a paid consumer proposal, that's recent enough to fail a stress test today but will clear on a known timeline. And non-conforming property — rural acreage, a unique construction type, a property mid-renovation — that an insurer or A lender won't touch as-is.

In each case, the loan is solving a defined, temporary problem with a visible end date. That's the pattern worth training an intake conversation to listen for, and it's the same pattern that shows up when a lender reads the file on the other end.

The strongest warning sign is a missing exit. If a client can't describe, in specific terms, how they get to renewal with a conventional or B lender — not “things will be better,” but an actual income timeline, a debt paydown plan, or a sale date — private debt risks becoming permanent at rates and fees built for a short-term bridge.

• →Using a private second mortgage to cover ongoing living expenses rather than a defined capital need.
• →Stacking a new private loan on top of an existing one without a plan to consolidate.
• →A client who hasn't budgeted for the payment shock at renewal if the exit doesn't materialize on schedule.
• →Pressure to close quickly without giving the client time to understand the full cost of credit.

A second private loan stacked on top of a first, without a documented plan to consolidate or pay it down, compounds the exposure described in interest-only private mortgages — each layer carries its own renewal deadline, and they rarely land on the same date, which is exactly how a manageable bridge turns into a scramble.

See the risks of private mortgages for clients for a fuller breakdown of what happens when the exit doesn't show up on time.

In Ontario, arranging private mortgages requires a mortgage agent level 2 licence, which itself requires an agent to have held a level 1 licence for at least 12 of the prior 24 months and complete an FSRA-approved Private Mortgages course. That's a deliberate design: FSRA has flagged private mortgage suitability as a recurring supervision priority, with examinations identifying gaps in disclosure and in the assessment of whether a private product actually fit the client's circumstances.

The practical version of suitability is simple to state and easy to skip under time pressure: can this client explain, in their own words, why this product and this exit make sense for their situation? If the answer is a shrug, the file needs more conversation before it needs a lender.

In practice, that conversation is worth writing down. A short file note capturing why the client asked for private financing, what alternatives were discussed, and what the client said in their own words about the planned exit is the kind of record a supervision examination looks for — and the kind of record that protects the broker just as much as the client if circumstances change partway through the term.

Private capital is expensive by design — the rate and fees reflect the lender's risk and the shorter, less liquid nature of the loan. That cost only makes sense against a real alternative cost: a collapsed purchase, a lost deposit, a forced sale at a bad time, or months of income the client can't yet prove going unfunded. Framed against those alternatives, a private bridge is sometimes the cheapest option on the table, even at a materially higher rate than a conventional mortgage.

Putting a number on the alternative cost makes the comparison concrete. A collapsed purchase can mean a forfeited deposit, a second round of moving and storage costs, and months of temporary housing while the search starts over; a forced sale on a compressed timeline can mean settling for well under market value. Weighed against those outcomes, a private bridge charging a materially higher rate for a few months can genuinely be the less expensive path — but the comparison only holds up if the broker walks the client through both numbers side by side, not just the private rate in isolation.

Brokers who place these files well, and keep the paperwork and disclosure clean end to end, lean on Treadstone's fulfillment associates to keep the file moving without dropping a condition — private files carry more moving parts, not fewer.

A well-placed private file has three things on record before it ever reaches a lender: a written note of the specific problem being solved, a dated exit tied to a named milestone rather than a season or a feeling, and a plain-language conversation with the client about what the product costs compared with the realistic alternative. None of that is complicated, but it's the difference between a file a compliance review sails through and one that raises questions six months later.

The same discipline applies whether the private loan is a first mortgage on a non-conforming property or a second mortgage layered behind an existing conventional loan — see the second mortgage broker playbook for how that sequence runs step by step on a second-position file.