How to Refinance a Private Mortgage: A Commercial Mortgage Guide for Ontario Real Estate Investors

For Ontario investors searching for ways to refinance a commercial real estate private mortgage or a real estate private mortgage, CornellMortgages.ca focuses on all asset classes of income generating real estate properties that may require a mortgage (IPP mortgages). CornellMortgages.ca is well positioned to provide private mortgage exit strategies and refinance strategies for income-producing real estate across Toronto, Scarborough, Oakville, Hamilton, Niagara, Kitchener-Waterloo, Cambridge, Guelph, London, Ottawa, Barrie, Windsor, and St. Thomas. Private lending can be an effective short-term financing solution when speed, flexibility, or asset transition risk makes institutional financing impractical, but it should almost always be structured with a defined exit strategy toward lower-cost capital.

Private lending has a legitimate role in commercial real estate finance. It can provide the speed and flexibility needed to close an acquisition, finance a value-add repositioning, bridge a timing gap, address title or tax issues, or stabilize an asset before conventional, alternative, or CMHC-insured financing becomes available.

The problem is not private lending itself. The problem begins when a borrower uses private capital as a long-term debt solution instead of a transitional instrument designed to move the property toward stronger underwriting metrics, better lender fit, and lower borrowing costs.

As a mortgage professional working with Ontario real estate investors, it is clear that many borrowers remain in private debt well beyond the point where a refinance may already be possible. If the property has stabilized, occupancy has improved, credit has recovered, or equity has increased, it may be time to review whether the asset can be repositioned into a conventional commercial mortgage, an alternative lender term facility, or a CMHC-insured structure where applicable.

Why Real Estate Investors Use Private Lending

Private mortgage lending often receives a negative reputation because many borrowers do not fully understand the all-in cost of capital, renewal risk, default provisions, lender fees, brokerage fees, payout restrictions, compounding interest clauses, and enforcement remedies attached to the mortgage.

That said, private financing remains an important part of the capital stack in commercial real estate. When structured properly, private financing may allow to close a transaction on an amazing real estate investment opportunity that is currently outside of the risk appetite of a conventional lender.

When used within real estate investment, a private mortgage offers:

1. Faster turnaround times and shorter closing periods;

2. More flexible underwriting than institutional lenders;

3. Equity-based lending decisions rather than purely income-based qualification;

4. Greater tolerance for bruised credit, incomplete stabilization, or unusual property scenarios;

5. Higher interest rates, lender fees, and brokerage costs; and

6. A short-term bridge solution while the property or borrower works toward bankable metrics.

   
   

The strategic question is not whether private lending is good or bad. The correct question is whether the private mortgage supports a defined asset-management plan and a realistic takeout strategy.

Speed and Execution Certainty

Private lenders set their own lending parameters, target asset classes, geographic comfort zones, loan-to-value ceilings, and borrower requirements. One lender may be comfortable with a mixed-use building in Hamilton, while another may prefer a multi-family asset in Ottawa, a warehouse in Scarborough, or a transitional apartment property in London.

This flexibility is one of the main reasons private capital remains relevant. A conventional commercial lender may require several weeks of underwriting, internal credit review, appraisal review, environmental diligence, legal due diligence, rent roll analysis, financial statement review, and sponsor assessment before issuing a commitment.

A well-packaged private mortgage file can often close materially faster. That speed may be critical when the investor needs to:

• Close on a time-sensitive acquisition;

• Remove a financing condition;

• Purchase an underperforming or distressed asset;

• Bridge a maturing mortgage;

• Resolve a tax arrears or title issue;

• Complete a value-add renovation and lease-up plan; and

• Refinance out of an unsuitable short-term facility.

Speed is valuable, but it should never excuse weak planning. Every private mortgage should be assessed against a future refinancing pathway, not just the urgency of the immediate closing.

Minimal Underwriting Does Not Mean No Underwriting

Private lenders are often mortgage investment corporations, family offices, high-net-worth individuals, private debt groups, or other non-bank capital providers. Their underwriting is generally more flexible than a Schedule A bank, credit union, life company, or CMHC-approved lender.

However, private underwriting is still underwriting. The lender is still evaluating whether the collateral is sufficient, whether the borrower has a credible exit strategy, and whether the asset is marketable if realizing on the asset becomes necessary.

A private lender will commonly focus on:

• Current appraised value;

• Marketability of the asset;

• Loan-to-value ratio;

• Mortgage ranking, whether first or second position;

• Property location and liquidity;

• Rent roll and lease documentation;

• Historical property financials;

• Borrower credit profile;

• Clean environmental report;

• Existing encumbrances and title issues; and

• Zoning, legal use, and ownership structure.

This flexibility is helpful for investors dealing with incomplete stabilization, weak credit, high leverage, non-standard borrower structures, lease-up risk, renovation exposure, or time-sensitive transactions. Even so, the borrower should prepare the file as though an institutional lender will eventually review it. That approach improves execution and helps create a stronger refinance path.

Private Mortgages are Primarily Equity-Based

Private mortgage lending is largely collateral driven. The lender’s core question is whether the property provides enough security to protect principal, accrued interest, legal costs, enforcement costs, selling expenses, and unpaid fees if the loan cannot be repaid.

This is why loan-to-value ratio matters so much in private financing. A property may appear to have strong equity on paper, but that equity can erode quickly once enforcement costs, commissions, arrears, taxes, legal fees, and accumulated interest are layered onto the debt stack.

Even further, a private lender does not use the same standard appraisers as the institutional lenders.  They have their own approved lender lists, the standard exclusions on their list may shock you.

In practice, private lenders focus heavily on:

• Current market value;

• Conservative value assumptions;

• Exit strategy at maturity;

• Property type and market depth;

• First versus second mortgage position;

• Estimated enforcement recoverability;

• Borrower equity cushion; and

• Refinance or sale feasibility.

For real estate investors, this means that waiting too long to refinance can become dangerous. A borrower may believe there is sufficient equity, only to discover that mounting fees and interest have reduced refinancing options or made the asset unattractive to conventional lenders.

Why Private Mortgage Rates and Fees Are Higher

Private mortgage pricing reflects risk. These lenders are generally solving problems that institutional capital avoids, including borrower credit weakness, incomplete personal guarantor documentations, lower debt service coverage, complex ownership structures, transitional properties, or urgent closing timelines.

Because of that risk, private mortgage terms typically include:

• Elevated annual interest rates;

• Lender fees;

• Brokerage fees;

• Legal fees;

• Appraisal costs;

• Renewal fees;

• Administration fees;

• Default interest provisions;

• Interest reserve requirements; and

• Compounding interest clauses in some cases.

Borrowers should evaluate the effective cost of capital rather than looking only at the headline interest rate. A one-year private facility with lender fees, broker fees, legal costs, and renewal risk may have a much higher true borrowing cost than it appears at first glance.

This is especially important for investors carrying a second mortgage or using private capital across multiple properties. Even when the deal makes sense in the short term, the portfolio should be monitored closely to ensure the debt remains transitional and does not become structurally permanent.

Four Signs It May Be Time to Refinance Out of Private Lending

If your investment property is currently financed with private capital, the following checks can help determine whether it may be time to transition toward a conventional, alternative, or insured commercial mortgage solution.

1. The Property Is Cash Flowing

If the property is now producing stable income and positive cash flow, that is often the first sign that a refinance review should take place.

Many investors use private money during acquisition, repositioning, vacancy resolution, or renovation. Once the property reaches stabilized occupancy and begins producing reliable net operating income, the financing profile may improve materially.

Lenders will commonly review metrics such as:

• Net operating income;

• Debt service coverage ratio;

• Debt yield;

• Vacancy assumptions;

• Operating expense ratio;

• Historical collections;

• Rent roll quality; and

• Tenant concentration and lease profile.

A stabilized asset with consistent debt service coverage is often much more financeable than the same property was six or twelve months earlier.

2. Your Credit Profile Has Improved With a Private Mortgage Lender

Some borrowers enter private lending because their credit does not meet institutional guidelines at the time of application. This may result from missed payments, elevated utilization, a consumer proposal, tax arrears, thin credit depth, or a temporary financial disruption.

If your credit profile has improved since the private mortgage was arranged, your refinancing options may also have improved. Lenders may consider not just the current score, but also utilization, recent payment history, liquidity, net worth, borrower strength, guarantor quality, and the explanation behind earlier credit events.

A stronger borrower profile can materially improve lender appetite, particularly when paired with a stabilized income-producing asset.

3. You Have Been in Private Debt Too Long

Private debt should generally be accompanied by a defined exit plan. If you have been in a private mortgage or unconventional facility for more than two years, a full mortgage review is often warranted.

This is particularly important where the loan includes interest-only terms, compounding interest, renewal fees, or a structure that allows unpaid interest to capitalize into the principal balance. Those features may be useful in the short term, but they can quietly erode borrower equity and increase loan-to-value over time.

Without active oversight, a mortgage that was intended as a bridge can become an obstacle to refinancing.

4. The Property Value Has Increased

If the property value has increased while the debt has remained stable or decreased, the loan-to-value ratio may have improved enough to open additional lender options.

That said, appreciation alone is not enough. Conventional and alternative lenders will still review net operating income, debt service coverage, rent roll quality, borrower credit, liquidity, property condition, and market strength.

The strongest refinance opportunities usually arise when both equity and operating performance have improved at the same time.

How CornellMortgages.ca Reviews Your Financial Position to Qualify a Real Estate Investor to Refinance a Private Mortgage in Ontario (Exit Strategy)

CornellMortgages.ca focuses on commercial mortgage financing for Ontario investors, developers, and asset managers seeking institutional-grade deal packaging, lender-facing underwriting logic, and practical guidance across private, alternative, conventional, and CMHC-oriented lending channels.

The platform is focused on commercial real estate mortgage solutions across Ontario markets including Toronto, Scarborough, Oakville, Hamilton, Niagara, Guelph, Brantford, Burlington, Kitchener-Waterloo, Cambridge, Ottawa, London, St. Thomas, Windsor, Barrie, and surrounding secondary and tertiary markets.

That positioning matters because getting out of private lending is not just about finding a cheaper rate. It is about understanding lender fit, asset quality, debt service coverage, leverage thresholds, sponsor strength, due diligence readiness, and the credibility of the refinance story being presented to the market.

For many investors, the refinance path may include one of the following:

• A conventional commercial mortgage on a stabilized asset;

• An alternative lender term facility where the file is improving but not fully bankable;

• A CMHC-insured multi-family structure where the asset and borrower profile fit program parameters; and

• A bridge-to-bridge strategy where additional time is needed to complete stabilization before conventional takeout.

Article FAQ

FAQ 1: What is a private mortgage for real estate investors?

A private mortgage for real estate investors is a real estate loan funded by a non-bank lender such as a MIC, family office, private debt group, or individual investor. These lenders typically focus more heavily on property equity, loan-to-value ratio, and exit strategy than on strict institutional underwriting metrics.

FAQ 2: When should an investor get out of private lending?

An investor should usually review exit options once the property has stabilized, the debt service coverage ratio has improved, borrower credit has recovered, or the loan-to-value ratio has declined enough to support a refinance. Private lending is generally best used as transitional financing rather than a permanent hold structure.

FAQ 3: Can a cash-flowing property still be stuck in private lending?

Yes. Many investors remain in private debt even after the property becomes cash flowing because they do not re-evaluate the file, do not package the refinance properly, or assume they still do not qualify. A structured review of NOI, DSCR, LTV, credit, and lender fit may reveal better financing options.

FAQ 4: What do lenders review when refinancing out of a private mortgage?

Lenders typically review property cash flow, rent roll, lease quality, net operating income, debt service coverage ratio, loan-to-value ratio, borrower credit, liquidity, net worth, title, appraisal, and overall marketability of the asset.

FAQ 5: Does CornellMortgages.ca work only in Toronto?

No. CornellMortgages.ca is positioned across Ontario, with a focus on Toronto, Scarborough, Oakville, Hamilton, Niagara, Kitchener-Waterloo, Cambridge, Guelph, London, Ottawa, Barrie, Windsor, and other secondary and tertiary markets where commercial real estate investors require tailored mortgage solutions.

Ready to Review Your Financing?

Start with a conversation. Bring the rent roll, operating statements, mortgage details, property information, and investment objectives so the refinancing options can be reviewed in a structured and lender-facing way.

CornellMortgages.ca 

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Cornell K. Haynes, Agent Level 2; V.P. Origination, NCompass Financial Inc.

📍 2739 Eglinton Avenue East, Toronto, ON M1K 2S2 

📍 302-2904 South Sheridan Way, Oakville, ON L6J 7L7 

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📋 cornellmortgages.ca is an online platform operated by Cornell K. Haynes, Agent 2 (FSRA #M22004316), licensed under R.D.M. Financial Consultants Ltd. (o/a The Mortgage Centre Canada), Broker Lic. #10716.

CornellMortgages.ca is an online platform operated by Perseverance Asset Management (1000339497 Ontario Inc.) to provide commercial real estate resources and facilitate commercial mortgage financing and advisory services on behalf of NCompass Financial Inc.

Mortgage services are available in Ontario only, while advisory services may be available more broadly depending on scope and structure.

Co-brokering available in other provinces with Cornell leading underwriting.

Disclaimer

This article is provided for general informational purposes only and does not constitute mortgage, legal, tax, accounting, investment, or financial advice. Lending terms, underwriting criteria, financing availability, interest rates, fees, loan-to-value limits, debt service coverage requirements, and approval timelines vary by lender, borrower profile, asset class, and market conditions. Independent legal and accounting advice should be obtained before entering into any mortgage, refinancing, partnership, corporate, or investment transaction.