The Role of Private Residential Mortgages in the Greater Vancouver Area

Unlike the traditional mortgages most homeowners are familiar with, private residential mortgages are loans secured by real property such as a house, condominium, or townhouse, and are structured to meet the needs of borrowers who require additional flexibility and shorter terms that banks or credit unions typically do not provide. In the Greater Vancouver Area, where supply-demand fundamentals remain resilient, these loans present a strategic opportunity to enhance the Nicola Canadian Mortgage Fund. 

Within the portfolio, this type of lending offers a disciplined way to support income generation and liquidity management. A focus on high-quality collateral, borrower equity, and clear repayment plans contributes to a stable and well-secured lending environment. 

While the Fund remains primarily invested in commercial mortgages, a selective allocation to private residential mortgages provides a complementary source of reliable, collateral-backed returns. As of October 31, these mortgages represent 7% of our direct lending portfolio. We are building this sub-strategy gradually and thoughtfully, supported by rigorous due diligence and deep familiarity with the Greater Vancouver residential market. 

This article outlines why this lending area is compelling today, what drives returns, and how risks are managed in alignment with long-term investor objectives. 

Why Private Residential Mortgages Can Be Attractive

Although distinct from traditional long-term bank mortgages, private residential mortgages share the same foundation: they are loans secured by real property. What differentiates them is their short duration and their emphasis on the strength of collateral and borrower equity. Their appeal as an investment begins with the tangible nature of the underlying asset, which provides clear security for the loan. These mortgages are issued by private lenders rather than traditional financial institutions, allowing for a more flexible structure while maintaining a strong focus on the value of the collateral. 

For investors, this structure can offer several benefits: 

• Returns typically range from 6–12% depending on the mortgage position and relative risk. 
• Loan-to-value ratios are generally lower than those of traditional residential mortgage loans. 
• Lending is focused on prime real estate markets with strong underlying demand. 
• Shorter one-year terms provide more liquidity than traditional mortgages, which commonly have five-year terms. 

These characteristics make private residential mortgages a useful complement to commercial lending strategies, helping balance income, diversification, and liquidity.

How Private Residential Mortgages Are Assessed 

Private lenders apply the traditional “5 C’s” of credit (Collateral, Character, Capacity, Capital, Conditions) and underwrite the mortgage loan application much like a conventional lender. However, due to the short-term nature of a private mortgage loan, there is added emphasis on the quality of the collateral, the conditions of the loan, and the plan for repayment at the end of the term. 

Assessing the loan:

• Property (Collateral) 
• Borrower (Character, Capacity, Capital) 
• Mortgage Terms (Conditions) 

Private lenders also focus on: 

• The underlying equity in the property
• The real estate market where the property is located
• The exit strategy that outlines how the mortgage will be repaid or renewed at the end of the term

The Greater Vancouver Area: A Strong Collateral Base

In British Columbia, housing demand continues to exceed supply in key markets across the Greater Vancouver Area and Fraser Valley. These regions are supported by sustained population growth, migration, immigration, geographic constraints, and limited new building activity. According to the Canada Mortgage and Housing Corporation (CMHC) Housing Market Information Portal, data for Greater Vancouver show an active market with constrained rental supply. These factors have helped stabilize conditions, shorten correction periods, and support ongoing growth.

Most residential properties listed for sale in Greater Vancouver continue to transact within a reasonable timeframe, which helps limit liquidity risk. Zolo.ca’s Vancouver Real Estate Trends and Housing Market Report for October 2025 notes an average home price of $1,374,941 and 1,397 new listings over the past 28 days. As of October 30, 2025, the median number of days a home remains on the market is 26¹. The typical term for a residential private mortgage is 12 months, providing a manageable level of liquidity should a property need to be sold during the mortgage term.

Municipalities across the Lower Mainland have focused on densification to address housing and rental shortages. This approach continues to increase demand for single-family homes while limiting their availability.

At a 2024 mortgage broker association event in Vancouver, Brendon Ogmundsen, Chief Economist for the British Columbia Real Estate Association, underscored the structural imbalance, noting that “the current rate of development and new housing starts is not enough to meet the demand for housing and rentals in the Lower Mainland over the next ten years.” His outlook reflects a broader expectation that housing shortages will persist for the foreseeable future.

Forecasts released in early 2025 anticipated largely flat home prices in the region; however, chronic supply shortages were expected to moderate any potential declines. This has been reflected in the year-over-year change in Vancouver housing prices.

How We Manage Risk in the Nicola Canadian Mortgage Fund

All investments involve uncertainties, including changes in property values and market liquidity. Within the Nicola Canadian Mortgage Fund, these considerations are addressed through a consistent underwriting process that includes: 

• Verifying the property’s value and condition through appraisals and site visits 
• Reviewing real estate trends and market dynamics in the area where the property is located 
• Applying conservative loan-to-value ratios 
• Evaluating borrower credit history and financial capacity 
• Ensuring a clear and credible plan for repayment of the mortgage loan at maturity 

While the history of any private mortgage strategy does not guarantee future results, our aim is to balance the risk and return objectives of our investors with the financing needs of borrowers. We do this through disciplined structuring, thorough due diligence, and an emphasis on high-quality collateral. 

Why This Matters for Investors

Private residential mortgages represent a short-term, well-secured form of lending that can complement a broader fixed income or alternative income strategy. In markets like the Greater Vancouver Area, where supply remains limited and demand for quality housing is consistently strong, these loans are supported by high-quality collateral and borrower equity. Their shorter terms also provide flexibility, allowing capital to be redeployed regularly as conditions evolve. 

For the Nicola Canadian Mortgage Fund, selective exposure to this type of lending helps balance income generation, liquidity, and diversification alongside its core commercial mortgage portfolio. When applied thoughtfully and supported by disciplined underwriting, private residential mortgages can contribute to stable, collateral-backed returns while maintaining the thoughtful approach that guides our investment philosophy.