General information only. This article is educational and is not financial, legal, tax or investment advice, or an offer to lend or invest. Get advice from qualified professionals about your situation.
Kelowna's real estate market has its own rhythm. Seasonal demand, recreational and investment property, new construction and a large number of self-employed owners all play a part. Many local deals don't fit neatly into a bank's guidelines. A private mortgage lender can fill the gap, as long as you understand what you're agreeing to. This guide explains how private mortgages work in Kelowna and the wider Okanagan, and how to judge whether one is right for you.
What a private mortgage is
A private mortgage is a loan secured against real estate and funded by a private lender instead of a bank or credit union. It's registered on title like any other mortgage. It can be a first mortgage, or a second mortgage behind an existing bank loan. Private mortgages are usually short-term, often one to two years. They're meant to solve a specific problem, not to be held for decades.
When a private mortgage makes sense in Kelowna
Common situations include:
- Buying before selling. You've found your next home or investment property, but your current one hasn't sold. See our guide to bridge loans.
- Self-employed income. Your business is healthy, but your tax returns don't show it the way a bank needs to see it.
- Property that doesn't fit the bank's rules. Bare land, properties that need renovation, mixed-use buildings, recreational property, or homes with unusual features. Our land loans and construction loans pages cover some of these.
- Accessing equity. You need capital for a business, a debt consolidation or an investment, and a second mortgage is faster than refinancing your whole first mortgage.
- Credit recovery. A past credit event has closed bank doors, but you have strong equity and a plan to move back to a traditional lender.
What Kelowna private lenders review
Private mortgage lenders focus on the property and the plan more than on ratios alone.
Equity and loan-to-value
The main question is how much the property is worth compared with the total debt against it. Lenders express this as loan-to-value (LTV). Lower LTV means less risk, and that usually means better terms. Expect the lender to order or ask for an independent appraisal.
Marketability
How easily could the property be sold if it had to be? A well-located home in an established Kelowna neighbourhood is assessed differently from a remote acreage or a highly customized property.
The exit strategy
How will the mortgage be paid out? Usually through a sale, a refinance with a bank once your situation improves, or a business event. A lender will want to see evidence that the exit is realistic within the term.
You
Your history, experience and openness matter. If there's a past credit issue, a short and honest explanation helps.
Costs to compare
Private mortgages cost more than bank mortgages. That's the price of flexibility and of the lender taking on more risk. Ask every lender for a written breakdown of:
- the interest rate and how it's compounded;
- lender and broker fees, and whether they come out of the advance;
- appraisal, legal and title insurance costs;
- prepayment terms and any minimum interest period;
- renewal fees if you need more time.
Compare offers on the total cost over your realistic term, not just the headline rate. Our article on how much private lenders charge explains how to do this.
Questions to ask yourself before you borrow
- Is the exit realistic? If the plan depends on a sale, is the asking price supported by the market? If it depends on a refinance, what has to change for a bank to approve you?
- Is there a cheaper option? Sometimes a bank extension, a vendor take-back, or a later closing date solves the problem.
- Can you carry the payments? Many private mortgages are interest-only. Make sure your cash flow covers them comfortably.
- Have you had independent legal advice? Always have a lawyer review the commitment before you sign.
How Diamond Ridge approaches Kelowna deals
Diamond Ridge has offices in Edmonton, Calgary and Kelowna. We're a group of entrepreneurs from many industries, and we look at the whole deal, not just a checklist. We review requests from $2,000 to $12,000,000 across real estate, business and equipment financing. Where the fundamentals are sound, we look for a structure that works for both sides.
We move quickly, but every file depends on appraisals, title and legal work, so we won't promise a closing date before we've reviewed the details. A complete package up front is the best way to keep things moving. See how it works and our full range of lending options.
Submit your Okanagan deal
If you have a property in Kelowna or elsewhere in the Okanagan that needs private financing, submit your deal. Include the property, the amount you need, any existing mortgages, and how you plan to repay. Our team will review it and reply by email.