Private Mortgage Exit Strategy:How to Refinance Back to A-Lender
A private mortgage is a bridge, not a destination. This guide walks through the four common exit paths, the timeline for each, and what to do this month so you can refinance to bank-channel pricing the moment you qualify.
The big idea: A 24-month private mortgage at 9.49% on $500K costs ~$95K in interest. Refinancing to an A-lender at 5.29% after 12 months costs ~$26K — saving $43K over the same 24 months. The exit IS the value.
The 4 Standard Exit Paths
Credit Recovery Exit (12–18 months)
You had a credit event — collection, late pays, consumer proposal. Pay every account on time for 12+ months. Most B-lenders re-qualify you at 12 months post-event; A-lenders typically at 18–24 months. Pull a free Equifax/TransUnion report quarterly to track progress.
Self-Employed Income Seasoning (24 months)
B-lender bank-statement programs accept 12 months of business deposits. A-lenders generally want 2 full years of T1 Generals + Notice of Assessment. If you started year 1 of self-employment, plan a 24-month private mortgage with refinance triggered the day your 2nd T1 is filed.
Property Appreciation Exit (6–18 months)
Bought a property under value or completed renovations. Re-appraise at 6–12 months and refinance once the LTV drops below 80% for A-lender qualification. Common in BRRRR investing — buy, renovate, rent, refinance, repeat.
Sale of Property Exit (3–12 months)
The exit is the sale — bridge between purchase and sale, or planned divestment. Lender just needs evidence the sale will fund the discharge: MLS listing, firm sale agreement, or scheduled close date.
Exit Timeline Template
| Month | Action |
|---|---|
| Month 0 | Private mortgage funds. Set 9-month calendar reminder. |
| Months 1–9 | Pay every credit account on time. File current-year taxes. Build/season the file. |
| Month 9 | Pull credit report. Run B-lender pre-qual. Identify gaps. |
| Month 10 | Order updated appraisal if property value matters. |
| Month 11 | Submit refinance application to B-lender or A-lender. |
| Month 12 | Close refinance. Discharge the private mortgage. Save 30%–50% on annual interest. |
Savings From Successful Exit
Scenario: $500K private 1st mortgage, 9.49% rate, exit to A-lender at 5.29% after 12 months.
• Year 1 private cost: $500K × 9.49% = $47,450 interest
• Year 2 A-lender cost: $500K × 5.29% = $26,450 interest
• Year-2 savings: $21,000. Over remaining 4 years of a typical 5-year term: ~$84,000 saved.
Refinance closing costs (~$3,000) pay back in under 2 months of savings.
Backup Plans (When the Exit Slips)
- Extend with current private lender for 12 months (re-priced + 1% lender fee typical)
- Replace with a B-lender bank-statement program at 5.49%–6.99%
- Add a co-signer to bring the file into A-lender qualifying ratios
- List the property — equity is preserved even if exit timing slips
FAQs
What is a private mortgage exit strategy?
An exit strategy is the documented plan to refinance your private mortgage into a lower-cost A-lender or B-lender mortgage — typically within 6–24 months. Common exits: refinance after credit recovery, refinance after self-employed income seasons (2 years T1s), refinance after property value appreciates, or sale of the property.
Why does a private mortgage need an exit strategy?
Private mortgages are designed as short-term solutions, not 5-year products. Carrying a private mortgage at 9%+ for 5 years costs far more than refinancing back to a 5% A-lender mortgage. The exit strategy is what justifies the temporary premium pricing.
How long can I keep a private mortgage?
Most Ontario private mortgages are 6, 12, or 24 months. Renewals are possible if your exit isn't yet ready but typically come with another lender fee and re-priced rate. The goal is to exit at or before the original term.
Can I refinance a private mortgage to an A-lender before the term ends?
Yes — and you should, the moment you qualify. Most Ontario private mortgages carry a 3-month interest prepayment penalty, often waivable if you give 60 days notice. Even with the penalty, exiting 6 months early can save thousands.
What if my exit strategy doesn't work out?
Backup plans matter. The three common backups: (1) extend the term with the current lender for another 12 months, (2) replace with a B-lender at slightly better pricing, (3) list and sell the property. A good broker plans backups before the original closes.
Who pays for the refinance to A-lender?
You do — legal fees ($1,500–$2,500) and appraisal ($400–$600) on the new mortgage. There's no broker fee on a standard A-lender refinance. Compared to the savings (often $5K–$15K/year in interest), the refinance pays for itself in 1–3 months.
Already in a private mortgage?
Let's run your file against A-lender and B-lender qualifying rules today. You may be 3 months from a refinance — not 12.