The Perils Of Private Mortgages In A Commercial Context

I took the one less traveled by,
And that has made all the difference.

― Robert Frost, The Road Not Taken

"Private mortgages", as opposed to "institutional mortgages", are mortgage arrangements by lenders who are not a bank listed in Schedule I or II to the Bank Act, a registered loan or trust company or credit union, or a licensed insurer or pension fund.¹ Such loans can be attractive to borrowers who need alternative financing not available from the big banks for any number of reasons.

While the Ontario Mortgages Act R.S.O. 1990, c. M.40, does not distinguish between a bank mortgage and a private mortgage, reality may unfold differently. Not all private lenders are the same. As a result, there can be particular risks to entering such mortgages. This article will highlight a few and suggest possible ways to protect yourself or your business.