Canadian Private Mortgages Are Going Global - But Investors Should Read the Fine Print
Image courtesy of The Street
A new model is aiming to make Canadian private mortgage investing accessible with as little as one dollar — and potentially bring capital from markets like Kenya into Canadian real estate lending. It is an interesting development, but as a mortgage professional, I believe accessibility should never be confused with simplicity.
Traditionally, private mortgage investing has often required a minimum investment of around $100,000, with funds committed for a year or more and concentrated in one mortgage. A platform such as Refi2 is proposing a very different structure: pooled exposure to Canadian private mortgages, tokenized access, and advertised liquidity rather than a traditional lock-up period.
Why this is attracting attention
The appeal is easy to understand. Private mortgages can offer higher yields than many conventional fixed-income products, with returns around 8% often cited in this space. They also allow capital to support borrowers who may not qualify under traditional bank guidelines because of income structure, credit events, timing, or property circumstances.
For international investors, Canadian real estate lending may look attractive because it is tied to real property in a regulated market. For Canadians, the concept could lower the entry barrier to an asset class that was previously available mainly to high-net-worth investors.
But a lower minimum investment does not lower the underlying risk.
The key concept: private lending
Private mortgages are not the same as bank mortgages. A traditional bank usually lends to borrowers with strong credit, verified income, and established debt-service ratios. Private lenders often step in where a borrower does not fit that box.
That can be useful. A self-employed homeowner awaiting a property sale, for example, may use a short-term private mortgage to access equity and bridge the gap until they qualify for a conventional refinance.
However, the higher interest rate exists for a reason: the loan carries greater risk. That risk may relate to the borrower, the property, the loan-to-value ratio, the exit strategy, or all of the above.
What “secured” really means
The article describes the investment as backed by Canadian private mortgages and overcollateralized by 110% or more. In plain language, that means the value of the pledged property is intended to exceed the mortgage amount.
That is a meaningful layer of protection, but it is not a guarantee. A property still has to be sold if the borrower defaults, and the sale may take time. Legal costs, carrying costs, declining property values, priority claims, and market conditions can all affect what investors ultimately recover.
As I see it, the most important question is not simply, “What yield does it advertise?” It is: What has to go right for that yield to be paid, and what happens if the borrower cannot repay?
An example for investors
Imagine two people each have $10,000 to invest.
Investor A places the full $10,000 directly into one private mortgage paying 8%. If that borrower makes every payment and repays on time, the investor earns a strong return. But if the mortgage goes into default, the investor’s capital is tied to one property, one borrower, and one legal process.
Investor B invests the same $10,000 in a diversified pool of private mortgages. That may reduce the impact of one borrower having trouble, but it does not eliminate risk. The investor still needs to know the quality of the mortgages, the average loan-to-value ratios, whether the loans are first or second mortgages, the fees, the redemption rules, and who bears losses if defaults rise.
Diversification can soften the impact of one bad loan. It cannot turn a high-risk lending category into a risk-free investment.
My perspective
I welcome innovation that increases access and gives people more choices. Canadian mortgage capital is evolving, and international interest in our lending market shows that investors see value in Canadian real estate-backed assets.
But mortgage investing should be approached with the same discipline as mortgage borrowing. A high advertised yield, instant liquidity, or a very low minimum investment should never replace proper due diligence. Especially when an investment is connected to private lending, investors should understand exactly what they own, how it is secured, what fees apply, and how they can access their money in a stressed market.
For homeowners, this trend is also a reminder that private mortgages can be helpful tools — but they should normally be used with a clear exit strategy. The goal should be to use private financing as a bridge, not a permanent solution.
Questions to ask first
Is the investment regulated, and in which jurisdiction?
Are the mortgages first mortgages, second mortgages, or a mix?
What are the portfolio’s average loan-to-value ratios?
How are property values assessed and monitored?
What happens if borrowers default?
What fees reduce the advertised return?
Is “instant liquidity” guaranteed, or dependent on available buyers or cash reserves?
How are international investors protected from currency, tax, and regulatory issues?
Thinking about a private mortgage, refinancing, or using home equity to solve a short-term financial challenge? Let’s build the right strategy before you sign anything.
Kechanth Kannan | Mr. Mortgage
Phone: +1 (647) 554-2718
Instagram: @_mrmortgage
