Being declined by a bank is discouraging, but it is also useful information. A decline usually points to one specific reason, such as income that is hard to document, a credit event, debt ratios, the property itself or timing, and once you know which one it was, the search for a workable option gets much narrower.
If you have been declined by a bank or an A lender, this page explains what usually sits behind that decision, how private and alternative lenders assess the same file differently, and what to do next.
Why banks and A lenders say no
Banks lend within tight, standardized rules because they answer to federal regulators. When a file sits outside those rules, the answer is often no, even when the property is valuable and the borrower is reliable. The most common reasons are:
- Income that cannot be verified the standard way, such as self-employment, commission or a recent job change
- A low credit score, collections, a missed payment or a recent consumer proposal or bankruptcy
- Debt-service ratios or the federal stress test pushing qualifying income below the payment
- A property the bank considers hard to resell, such as rural, unique or mixed-use
- An appraisal that comes in below what was expected
- A timeline shorter than a bank’s underwriting process allows
How a private lender looks at the same file
Private lenders are not bound by the federal stress test, and they lend against the property first. That means the questions change: how much is the property worth, how much is already owed against it, and how will this loan be repaid? Income and credit still matter to the overall picture, but they are not the gatekeeper they are at a bank.
Decisions are also typically faster, because a private lender is often a single decision-maker rather than a committee. The trade-off is cost: private mortgages carry higher rates and fees than bank mortgages, and they are meant to be temporary.
What it costs, honestly
Alongside the interest rate, expect a lender fee, a broker fee, legal fees and an appraisal. Those are normally paid out of the mortgage itself, so the mortgage has to be a little larger than the cash you need. Our Private Mortgage Payment Calculator does that math for you and shows the total mortgage amount that nets you the cash you asked for, plus an estimated monthly payment.
What to do in the first 48 hours after a decline
- Ask the lender for the specific reason, in writing if possible.
- Pause new applications. Multiple credit inquiries in a short period can make the picture worse.
- Gather the property basics: latest mortgage statement, property tax bill and insurance details.
- Decide what the money is for and how long you realistically need it.
- Talk to a mortgage broker before choosing, so the solution matches the reason you were declined.
Plan the exit before you borrow
A private mortgage should have an end date. For most borrowers that means refinancing with a bank once income or credit has recovered, or selling the property. If the reason for the decline was timing, the exit may simply be the funds you are waiting on. Without a clear exit, costs stack up, so it is the first thing we discuss.
Your situation may also fit one of these pages: Mortgage Renewal Problems, Mortgage Arrears and Financial Pressure or Bruised Credit Mortgage.
Frequently asked questions
Do I need good credit to get a private mortgage after a bank decline?+
Not usually. Private lenders focus on the value of the property and the equity in it more than on your credit score. A credit event can still affect the rate and the maximum loan-to-value, and credit may be reviewed later as part of the full application with your consent.
How fast can private financing be arranged?+
Timelines depend on the property, the appraisal and the legal work, but private financing can often be arranged in days to a couple of weeks rather than the weeks a bank may take. Files with documents ready move fastest.
Will a private mortgage hurt my chances of getting a bank mortgage later?+
A private mortgage is not a mark against you by itself. Most borrowers use one to bridge a temporary problem, then refinance with a bank once income or credit has been repaired. Making payments on time during the term helps.
How much will a private lender lend against my home?+
It varies by lender, location and property type. As a general guide, first mortgages are often available up to roughly 65 to 80 percent of the property value, with lower limits for condos and for properties in foreclosure. Second mortgages are measured on combined loan-to-value.
Does speaking with you commit me to anything?+
No. Getting an estimate is not a commitment and no credit check is needed to see your options. Any financing is subject to lender approval, an appraisal and legal documentation.
NOW Mortgage is a RECA-licensed brokerage operating under Dependable Mortgage Solutions Corp. Call 587-200-6727 or email lending@nowmtg.ca. Information on this page is general in nature and is not a commitment to lend. Financing is subject to lender approval, property assessment and final documentation. OAC.