Bridge Financing vs. Private Mortgage in Ontario:Which is Right for You?
Both bridge loans and private mortgages solve short-term capital problems that banks won't touch — but they're built for very different situations. Here's a side-by-side breakdown so you can pick the right tool.
Bridge Financing
Short-term loan from 5.89% that closes the gap between a property purchase and the sale of your existing home.
Best when you have a firm sale and need to close the next purchase first.
Private Mortgage
Flexible 1st or 2nd mortgage from a private lender or MIC, from 7%+, for bank-declined, self-employed, or equity-rich borrowers.
Best when income or credit doesn't fit bank rules, but you have equity.
How to Cost Out Two Private Options, Side by Side
Rate alone tells you almost nothing on a short-term mortgage. Ask every bridge lender — or your broker — these eleven questions in order, write the answers in a column for each option you are weighing, and the cheaper deal becomes obvious. Below is what a typical Ontario bridge financing answer looks like in 2026.
| Question to ask | Bridge financing answer |
|---|---|
| 1. What is the interest rate? | 5.89% – 7.99% in 1st position, interest-only payments. Confirm whether the quote is compounded semi-annually and whether it is fixed for the full term. |
| 2. What are the lending / upfront fees? | Lender fee 0.5% – 1% and broker fee 0.5% – 1% of the loan amount, deducted from the advance rather than paid in cash. |
| 3. Any other upfront fees (appraisal, application, inspection)? | Appraisal is often waived when the sale is firm; otherwise $400 – $900. Admin/underwriting $250 – $500. Any application deposit should be credited at closing. |
| 4. What is the length of the term? | 3 – 12 months, usually matched to the gap between your purchase closing and your sale closing. |
| 5. What are the renewal fees? | Bridge loans are rarely renewed. If your sale collapses or gets delayed, extensions are priced at roughly 0.25% – 0.5% of the balance per month. |
| 6. Is renewal guaranteed, or must you re-qualify? | Not guaranteed. An extension is at the lender's discretion and normally requires evidence the sale is still proceeding, or a new firm agreement. |
| 7. Are renewal fees paid upfront or capitalized? | Usually paid in cash on the extension date. Some lenders will capitalize the fee into the balance if there is still room under the maximum LTV. |
| 8. What are the legal fees? | $1,200 – $2,000, and often reduced because your purchase lawyer can register the bridge at the same time as the purchase. |
| 9. What are the discharge fees? | $300 – $500 lender discharge/administration fee plus $400 – $700 for the lawyer to prepare and register the discharge. |
| 10. Early breakage / prepayment penalty | Most bridge loans are fully open after a one-month minimum interest period, so you pay only for the days you actually use the money. Confirm this in writing. |
| 11. Total cost of borrowing (the number that matters) | Interest for the days used, plus lender and broker fees, appraisal, legal and discharge — then the loan is gone. Ask for this as one dollar figure before you sign. |
Ranges are typical Ontario market terms as of April 2026 and vary by lender, LTV, property type and location. Every fee must be disclosed to you in writing before you are bound.
When Bridge Financing Wins
- You have a firm, unconditional sale on your existing home — the exit date is already on paper
- You need money for weeks or a few months, and an open loan means you only pay for the days you use
- Total fees are lower: one small lender fee, no renewal cycle, no second set of legal costs
- Your income and credit already pass bank rules — timing between closings is the only problem
- The lender can piggyback the existing appraisal and your purchase lawyer, cutting upfront cost
When a Private Mortgage Wins
- There is no scheduled sale — you need 12 to 24 months of runway, not weeks
- The bank declined you on credit, arrears, insolvency history or property type, so equity has to do the qualifying
- You are self-employed and cannot show bank-style income, but the equity and exit are strong
- You need to clear high-rate debt, tax arrears or a power of sale now, where speed is worth the fee
- You want a rate-and-fee structure you can renew or capitalize while you repair the file for an A/B lender
Real Cost Example: $300,000 Originated, Renewed Once, Then Discharged (24 Months)
Same borrower, same $300,000, same 24 months of use. One file is a private 1st mortgage on a 12-month term that gets renewed for a second 12 months, then discharged on refinance. The other is bridge financing used for 6 months and paid out from the sale — then the borrower carries nothing. Watch what the fee cycle does.
Private 1st mortgage @ 8.99%, interest only, 12 + 12 months
- Interest, year 1: $300,000 × 8.99% = $26,970
- Lender fee at origination (1.5%): $4,500
- Broker fee at origination (1.5%): $4,500
- Appraisal + admin: $1,100
- Legal (lender + ILA) at origination: $2,400
- Renewal fee at month 12 (1%), capitalized to balance: $3,000
- Interest, year 2 on $303,000 @ 9.49% (renewal reset): $28,755
- Discharge fee (lender) + legal registration at month 24: $1,050
- 24-month total cost of borrowing: ≈ $72,275 — roughly 12.0% per year, all in
Bridge 1st mortgage @ 6.99%, open, used 6 months then paid from sale
- Interest for 6 months: $300,000 × 6.99% ÷ 2 = $10,485
- Lender fee (1.50%): $4,500
- Broker fee (1.0%): $3,000
- Admin, no new appraisal (firm sale): $400
- Legal, bundled with the purchase closing: $1,400 + HST and disbursements (estimated $2,400)
- Renewal fees: $0 — the sale closes, the loan is gone ($750 — 0.5% of the loan amount in many cases — only if you choose to renew at the end of the term)
- Discharge fee + registration: $800
- Total cost of borrowing: ≈ $21,585 — roughly 14.4% per year for the 6 months used
The lesson: the two annualized costs are close. The difference in total dollars is almost entirely time and the fee cycle — origination fees charged twice (once at funding, once at renewal), a capitalized renewal fee that grows the balance you pay interest on, and a rate reset on the second term. If your exit is real and dated, buy the shortest term you can. If it is not, price the renewal before you sign the first commitment.
Illustrative only, simple-interest math for clarity, rates and fees as of April 2026, subject to lender approval and property review. Your actual cost of borrowing will be disclosed in writing before you are bound.
FAQs
Can I convert a private mortgage into a regular bank mortgage later?
Yes — that is the standard exit strategy. Most private mortgages are structured for 6–24 months while you repair credit, season self-employed income, or stabilize the property, then refinance to an A or B lender at lower rates.
Why is comparing only the interest rate misleading on a private mortgage?
On a 12-month private mortgage, fees can cost more than the interest. A 1% difference in rate on $300,000 is $3,000 over a year, but a 2% lender fee is $6,000 charged on day one. Always compare the total dollars leaving your pocket over the full time you expect to hold the loan — interest plus lender fee, broker fee, legal, appraisal, renewal fees and discharge fees.
Is a private mortgage renewal guaranteed at the end of the term?
Usually not. Most private and MIC commitments are written so renewal is at the lender's sole discretion, and you re-qualify on updated value, payment history and property condition. Some MICs offer a pre-approved renewal option for a fee. Ask for the renewal language in writing before you sign — an unguaranteed renewal is a refinancing risk you have to plan for.
Are renewal fees paid in cash or added to the mortgage?
It depends on the lender and your loan-to-value. If there is room under the maximum LTV, most lenders will capitalize the renewal fee into the balance so nothing comes out of pocket. If you are already at the LTV ceiling, the fee must be paid in cash on the renewal date. Capitalizing is convenient but increases your balance and your interest cost for the next term.
What discharge and prepayment costs apply if I pay out early?
Expect a lender discharge/administration fee ($300–$500), a lawyer's discharge and registration cost ($400–$900), and a prepayment charge. Private prepayment charges are typically expressed as a minimum interest period (commonly 3 months) or as interest to the end of the term if the mortgage is closed. Bridge loans are usually fully open after a short minimum period, which is one of their biggest advantages.
Do private lenders charge upfront fees before funding?
A lender may collect an application or underwriting deposit to cover the appraisal and legal review, and that deposit should be credited against your closing costs. In Ontario, all fees and the cost of borrowing must be disclosed to you in writing at least two business days before you are bound. Never send money to a lender that will not put the full fee schedule in writing first.
Not sure which one fits?
Get a free 15-minute strategy call with The Juneja Group. We'll compare bridge and private options against your real numbers.
Bridge financing Canada — by lender type and city
Whether you searched bridge financing Canada, bridge loan lender Hamilton, or private lending Ontario, these pages break down cost, LTV and funding speed for that exact situation.