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An exit strategy is a private-lending borrower’s documented plan for how and when a short-term loan will be repaid — typically through refinancing to a conventional lender, a property sale, or another confirmed source of funds.
Private and bridge loans are short-term by design, so the lender's real question isn't just whether the borrower can service interest along the way — it's whether the loan can actually be repaid at maturity. A vague or unconfirmed answer to that question is one of the first things a broker or underwriter pushes back on before funding a file.
The most common exits are refinancing into a conventional or B-lender mortgage once a credit, income, or documentation issue is resolved, selling the subject property or another asset, or a confirmed lump-sum source such as an inheritance or business sale. Provincial regulators frame private mortgages the same way — a short-term bridge, not a long-term solution — which is exactly why the exit matters as much as the rate.
Standard underwriting question: Canadian private lenders and mortgage brokerages routinely require a stated exit strategy before funding, not just at renewal.
Regulatory framing: FSRA and other provincial regulators describe private mortgages as intended to be a short-term bridge, not a long-term financing solution.
Common exits: refinancing to a conventional or B-lender mortgage once qualifying issues are resolved, or selling the property, are the two most typical paths.
Weak exits are a red flag: a vague or unconfirmed exit strategy is one of the first things a broker or lender will question before approving a private file.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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