The fix-and-flip real estate model—buying a property at a lower price, renovating it, and then selling it for a profit—is a tried-and-tested investment strategy. While it can be highly profitable, it also requires substantial upfront capital and a financing strategy that allows for speed, flexibility, and quick turnaround. That’s where private mortgages come in.
If you’re a real estate investor in Ontario, using private mortgages Ontario for your next fix-and-flip project could give you the leverage and speed you need to stay competitive. Even better, if you’re already a homeowner, tapping into your equity through a second mortgage can help fund the purchase and renovations without disturbing your primary mortgage.
In this article, we’ll explore how private mortgage financing works, why it’s a great tool for flipping houses, and how to use it smartly to maximize your return on investment.
What Is a Private Mortgage?
A private mortgage is a loan provided by individuals, private lenders, or mortgage investment corporations rather than traditional banks or credit unions. These loans are often asset-based, which means the lender is more interested in the property value and potential resale than your credit score or income history.
In Ontario, private mortgages are increasingly popular among real estate investors because they offer:
- Faster approvals
- Less paperwork
- Flexible lending criteria
- Short-term options ideal for flipping projects
Unlike traditional lenders, private mortgage lenders are focused on your exit strategy—how and when you plan to repay the loan—rather than your financial history.
Why Use a Private Mortgage for Fix-and-Flip?
Traditional bank loans aren’t always ideal for fix-and-flip projects. They take longer to process, require perfect credit, and often won’t fund properties that need major renovations.
A private mortgage, however, is tailor-made for this kind of fast-paced real estate investment. Here’s why:
- Speed
Time is everything in the flipping game. Private lenders can approve and release funds in days, not weeks. This gives you an edge when bidding on properties that are priced below market value and attract multiple investors.
- Flexible Terms
Private lenders don’t follow rigid formulas. They look at the potential of the property, your renovation plan, and how you intend to flip and repay the loan. This flexibility can help you get funded even if you’re self-employed or have less-than-perfect credit.
- Short-Term Financing
Most fix-and-flip projects don’t need long-term financing. You want to borrow, renovate, sell, and repay within 6–12 months. Private mortgages typically offer 6-month to 2-year terms, making them a perfect fit for this model.
- Property-Based Lending
Private lenders are more concerned with the after-repair value (ARV) of the property than your personal income. If the numbers make sense, you’re more likely to get approved—even if you wouldn’t qualify with a traditional bank.
Using a Second Mortgage for a Fix-and-Flip
Already own a home? You may not need to apply for an entirely new loan. Many investors apply for a second mortgage on their existing property to fund a flip project. This allows you to use your home equity without refinancing your current mortgage.
Benefits of Using a Second Mortgage:
- Access cash quickly without affecting your primary mortgage
- Lower interest rates compared to other forms of unsecured debt
- Flexibility to use the funds for both purchase and renovation
- Only pay interest on the borrowed amount for the loan term
A second mortgage is a strategic way to enter the fix-and-flip market with minimal disruption to your main financial obligations.
Steps to Secure a Private Mortgage for Fix-and-Flip
- Find the Right Property
Look for undervalued homes in desirable neighborhoods with strong resale potential. The key is to buy low, renovate smartly, and sell high within a short timeframe.
- Have a Clear Renovation and Exit Plan
Private lenders will want to know:
- What repairs you plan to make
- Estimated timelines and budgets
- Expected after-repair value (ARV)
- Your exit strategy (typically selling the home)
The clearer your plan, the higher the chance of securing funding.
- Work with a Broker Familiar with Private Mortgages
A qualified mortgage broker can help you connect with private mortgage lenders in Ontario who specialize in real estate investments. They’ll present your deal professionally and negotiate better terms on your behalf.
- Be Prepared for Fees and Interest Rates
Private mortgages come with higher interest rates—typically 8% to 12%—and additional fees, such as:
- Lender fees
- Broker fees
- Legal fees
- Appraisal costs
That said, these costs are often worth it if the flip yields a solid return on investment.
- Stay on Schedule
The longer your project takes, the more interest you’ll pay. Delays can eat into your profit. Having reliable contractors, a detailed schedule, and backup plans can help you stay on track and protect your bottom line.
Risks and How to Manage Them
Like any investment strategy, using private financing for flipping has its risks:
- Market Changes: If property values drop, your profit margin could shrink.
- Cost Overruns: Unexpected repairs can derail your budget.
- Exit Challenges: If the home doesn’t sell quickly, you may need to refinance or extend the loan.
Mitigation Tips:
- Always build a 10–15% contingency into your renovation budget
- Get accurate ARV estimates from local realtors
- Pre-list or pre-market the property as renovations near completion
Final Thoughts
Fix-and-flip real estate investing can be highly rewarding—but only when backed by smart financing. Private mortgages in Ontario offer the speed, flexibility, and accessibility that traditional banks often can’t match, especially when timing and agility are everything.
Whether you’re using a private mortgage to acquire your next investment property or leveraging your home equity through a second mortgage, having a clear plan, realistic timeline, and reliable lender is the key to success.
If you’re ready to take the leap into real estate flipping, consider talking to a mortgage broker who understands the Ontario market and can connect you with the right private lender to support your next profitable project.
