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Private Mortgage Investments: A Compelling Opportunity in a Shifting Landscape

14 May 2024

The government of Canada’s frequent tinkering with the residential mortgage market has made it increasingly more difficult for borrowers to qualify for a traditional mortgage. While the reasons behind new regulatory actions may be sound, none of the changes since 2016, when the mortgage stress test was introduced, have addressed the underlying issues of housing affordability and access to financing that policymakers are concerned about. 

Against this backdrop, innovations in financing technology have sought to close the gap between stringent lending standards and the growing demand for residential mortgages across Canada. Private mortgages are filling this gap, and they have become one of the most popular alternative financing solutions for Canadians. The rising trend of private mortgages has major implications for investors in the broader mortgage and real estate markets. 

What are Private Mortgages?

In Canada, banks and traditional financial institutions aren’t the only entities that provide mortgage financing. Borrowers who need a short-term loan to purchase a home or refinance an existing property can also obtain a mortgage through a private lender. Private lenders are typically structured as mortgage investment corporations or individual private lenders that include investors, conglomerates, or high-net-worth individuals. 

Unlike traditional banks, private mortgage lenders are not required to abide by the stringent lending rules imposed by the federal government. As such, they have more flexibility to consider a borrower’s unique circumstances when evaluating a mortgage application and setting terms. Often, borrowers turn to private lenders when their loan application is turned away by the major banks.

Because private lenders consider a borrower’s unique circumstances and are willing to offer more flexible loan arrangements, they usually charge higher fees and interest than traditional lenders. For borrowers, a private mortgage is often worth the extra costs because it provides much-needed short-term funding, particularly when no other option is available. For investors, investing in private mortgage lending is a highly lucrative opportunity that has historically generated higher yields than other markets.  


Factors Driving the Popularity of Private Mortgages in Canada

The private mortgage market has been growing steadily since the 2008 financial crisis, as stricter lending regulations made it harder for borrowers to qualify for conventional loans. When mortgage stress tests were introduced in 2016, more Canadians turned to private mortgages to meet their financing needs.

However, demand for private mortgages really shifted into higher gear during the COVID-19 pandemic, when many Canadians faced employment disruption and surging home values priced many borrowers out of conventional mortgage markets. The Bank of Canada raising interest rates multiple times in 2022 and 2023 also challenged borrowers’ ability to obtain conventional mortgages.

Against this backdrop, many Canadians have found it more expedient – and in some cases, more economical – to borrow from a private lender. A quicker and more streamlined approval process and a greater emphasis on home equity over income and credit score made these loans more attractive. Borrowers who needed cash quickly to cover unexpected layoffs or housing costs, such as home repairs, have also found private mortgages to be more convenient. 

According to data cited by the Financial Post, by 2023, more than one-third (35%) of traditional financial institutions had tightened mortgage lending requirements. It’s no coincidence that, in the same year, the share of new mortgages extended by private lenders jumped to 8% from 5.3% in 2021, according to the Canada Mortgage and Housing Corporation. Over the same two-year period, the percentage of mortgages originated by major banks fell to 53.8% from 62%.

The Impact of Private Mortgages on Investors

Private mortgages are part of a much larger asset class known as alternative investments. As demand for private mortgage solutions continues to grow in the Canadian marketplace, investors are increasingly allocating to private mortgage investing strategies. 

From an investment perspective, one of the most attractive features of private mortgages is their track record of providing high-yield investment opportunities compared to traditional mortgage products and other fixed-income securities. Private mortgage investments have historically outperformed other yield-bearing investment portfolios, such as government bonds and Guaranteed Investment Certificates. For example, CMI Financial Group offers private mortgage investing programs that have historically yielded between 6% and 16% annually. 

Investments in private mortgage lending are also non-correlated with public markets, so their performance isn’t dictated by economics, monetary policy, or sudden shifts in the business cycle. These factors make private mortgage investments attractive portfolio diversifiers, especially for defensive-minded investors and those investing for retirement or other long-term goals. 

Their historical outperformance makes private mortgage investments strong portfolio diversifiers for defensive and risk-off investors. Private mortgage investment programs also employ risk management strategies and can provide varying degrees of market exposure depending on an investor’s goals, timeline, and risk tolerance. Private mortgage investment portfolios can be structured from ultra-defensive to higher yield, so they appeal to a wide range of investors. 

Opportunities for Investors

As an alternative to government bonds and real estate, private mortgage investing provides investors with the opportunity to capitalize on the growing demand for alternative lending. Given the size and growth rate of the alternative lending market, there’s no shortage of opportunities, from short-term financing options with potentially high returns to funding niche markets such as funding investment property mortgages for vacation and rental properties.

By operating in the private capital markets, investors can work with borrowers who need immediate access to funding and are willing to accept higher interest payments for a quick and efficient loan process. Unlike real estate investing, which carries high overhead expenses, mortgage investing can potentially provide a regular source of income without the same risks and liquidity constraints. 



Investing in private mortgage lending is suitable for investors with various risk profiles, from ultra-defensive to high-yield-seeking. However, to determine the optimal investment strategy, investors should work with trusted institutions with a proven track record in the private mortgage lending market. Working with a private mortgage investing partner can help investors construct mortgage portfolios that align with their risk tolerance, investment horizon, and overall goals.  

CMI Financial Group is one of Canada’s fastest-growing non-bank financial institutions. For more than a decade, CMI has focused exclusively on private mortgage lending, delivering investment opportunities that meet the unique needs of investors. CMI offers a full-service private mortgage investing program based on transparency, innovation, and industry-leading due diligence practices. 

Each curated mortgage opportunity is assessed internally by an in-house team of mortgage specialists and adjudicators, who handle all regulatory and compliance requirements on behalf of investors. Factors such as the mortgage borrower’s profile, the value and condition of the property, and the duration and size of the loan are thoroughly assessed for quality and fit before being presented to investors.  


Despite regulatory bottlenecks and more stringent lending requirements, mortgage demand in Canada remains resilient. Private mortgage lenders are stepping up in a big way to meet that demand, giving borrowers more options in obtaining the financing they need. 

For investors, investing in private mortgage lending presents a unique opportunity to access a highly liquid market that has historically produced above-average returns relative to other fixed-income products. CMI Financial Group has been at the forefront of Canada’s rapidly growing private mortgage market. To learn more about our private mortgage investing program, contact us today for a free consultation.

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