How Much Does a Private Mortgage Cost in Ontario? Fees Explained

The Five Costs of a Private Mortgage

Private mortgages serve a genuine purpose: they provide financing when banks say no. But they come with costs that are meaningfully higher than conventional mortgages, and those costs are not always presented transparently. Some borrowers sign documents without fully understanding the total cost of borrowing until it is too late.

This guide lays out every fee you should expect with a private mortgage in Ontario, uses a real-dollar example so you can see the total picture, and explains when a private mortgage tends to make financial sense versus when it does not.

Every private mortgage in Ontario involves some combination of these five cost categories. Not every deal includes all five, but you should understand each one.

1. Interest Rate

Private mortgage interest rates in Ontario vary by lender, property, and borrower profile. Rates are generally higher than those on conventional bank mortgages, and your broker should give you the actual rate for your file in writing. OAC. Rates subject to change. Conditions apply.

What drives the rate:

• Loan-to-value (LTV): Lower-LTV deals, where the lender has a larger equity cushion, generally receive lower rates. Deals at higher LTV generally cost more because the lender is taking on more risk. Ask your broker for the current rate at your specific LTV; it moves with the market.
• Property type: Urban residential properties in the GTA, Ottawa, Hamilton, and London tend to get the most competitive rates. Rural properties, vacant land, and commercial properties carry premiums.

Most private mortgages are interest-only, meaning your monthly payment covers only the interest. You are not paying down the principal. This keeps the monthly payment lower but means you owe the same amount at the end of the term.

2. Lender Fee (Commitment Fee)

The lender fee is a one-time charge deducted from your mortgage advance at closing. It compensates the private lender for the risk and administrative cost of setting up the loan.

The fee is usually a percentage of the mortgage amount, and it varies by lender and file.

For illustration, a $200,000 private mortgage with a 2% lender fee means $4,000 is deducted upfront. You receive $196,000 in your hand (before other closing costs), but you owe $200,000.

Some lenders charge flat fees instead of percentages. Others waive the fee for very low LTV deals. Always ask: "What is the lender fee, and is it deducted from my advance or added to the mortgage?"

3. Brokerage Fee (Broker Fee)

In Ontario, mortgage brokers are permitted to charge fees to the borrower on private mortgage placements. This is different from conventional (A lender) mortgages, where the lender pays the broker and the borrower pays nothing.

The fee is usually a percentage of the mortgage amount and varies by complexity.

Our brokerage fee is disclosed in writing before you sign anything. It appears on your commitment letter and on the written cost of borrowing disclosure you are given before you are bound to the mortgage.

Important: Ontario's rules for mortgage brokerages restrict when and how a brokerage can collect fees or deposits from a borrower, and the exact rule depends on the size and type of the mortgage. In practice, most brokerage fees on a private mortgage are collected at closing, not in advance. If a broker asks you to pay upfront and "sort out the fees later," ask a lawyer whether that fits with the rules before you agree.

4. Legal Fees

Both you and the lender need legal representation for a private mortgage. In many cases, one lawyer acts for both parties (with informed consent), which reduces costs. In other cases, particularly when the loan is larger or more complex, each side retains its own lawyer.

The borrower's legal fees include disbursements and title insurance. If the lender has a separate lawyer, those fees are often charged back to the borrower. Ask for a written estimate of both.

Legal fees cover title search, mortgage registration, compliance review, and the actual disbursement of funds. Do not skip the lawyer or try to save money here. Your lawyer is your protection.

5. Appraisal Fee

Private lenders require a professional appraisal of the property to confirm its current market value and condition. This is ordered by the lender or broker but paid by the borrower.

Complex or rural properties generally cost more to appraise than a standard residential property.

Some private lenders accept desktop appraisals or drive-by valuations for low LTV deals (under 60%), which can reduce this cost. But for most transactions, expect a full interior appraisal.

Total Cost of Borrowing: A $200,000 Private Mortgage Example

Let us walk through a realistic, illustrative example so you can see the complete picture. The figures below are for illustration only; your own quote will depend on your file.

Scenario: Your home is worth $650,000, you owe $250,000 on your first mortgage, and you need $200,000. Combined LTV: $450,000 / $650,000 = 69%. That works for most private lenders.

That is $29,430 to borrow $200,000 for one year. As a simplified illustration only, that works out to roughly 14.7% of the amount borrowed when interest and every fee are added together and divided by the principal. This is not the same calculation as the annual percentage rate (APR) on your cost of borrowing disclosure, which is calculated under a prescribed formula. Always compare offers using the APR your broker gives you in writing, not a rough percentage like the one above.

What you actually receive at closing:
$200,000 minus $4,000 (lender fee) minus $3,000 (brokerage fee) minus $2,000 (legal) minus $450 (appraisal) = $190,550 net proceeds.

At the end of 12 months, you owe $200,000 in full (the principal), plus you have paid $19,980 in interest over the year.

This is why transparency matters. A borrower who hears "9.99% interest" without understanding the full cost picture, and without asking for the APR in writing, is making an uninformed decision.

FSRA Disclosure Requirements: What Your Broker Must Tell You

The Financial Services Regulatory Authority of Ontario expects a mortgage brokerage to give a borrower a written cost of borrowing disclosure before the borrower is bound to the mortgage. Your disclosure should include:

• Total cost of borrowing, expressed in dollars
• Annual percentage rate (APR), not just the stated interest rate
• All fees and charges broken down individually
• Key terms: principal, rate, term, payment amount, payment frequency, maturity date
• Prepayment provisions, including any penalty for paying the mortgage off early

You should receive this disclosure in writing, with enough time to review it before signing. If you are being pressured to sign on the spot, slow down.

Red Flags: What to Watch for With Other Brokers

The private lending space in Ontario is legitimate and regulated, but it also attracts operators who take advantage of vulnerable borrowers. Here are the warning signs:

Fees That Keep Growing

You were quoted 1% brokerage fee, but at closing it is 2% plus an "administration fee" plus a "processing fee." Every added fee should have been disclosed upfront. If it was not, push back or walk away.

No Written Disclosure Before Signing

As noted above, you should receive written disclosure before you are bound to the mortgage. A broker who says "we will get you the paperwork after" is not following that requirement.

Pressure to Close Immediately

If you are told a rate or commitment will disappear within hours, slow down and ask how long the offer is actually valid in writing. A legitimate broker will give you time to review the commitment and get independent advice before you sign.

No Discussion of Exit Strategy

Any responsible broker arranging a private mortgage should be talking about how you get out of it. What does your credit need to look like in 12 months? What income documentation will you need? If the broker is only focused on getting this deal closed and has no interest in your next step, they are collecting a fee and moving on.

Excessively High Fees

While private mortgage fees are higher than conventional, there are limits to what is reasonable. Ask for the total cost of borrowing and the APR in writing, and compare them against at least one other brokerage before you sign. A wide gap between quotes is a reason to ask hard questions.

When a Private Mortgage Makes Financial Sense

A private mortgage is a tool, not a trap. It tends to make sense in these scenarios:

Debt Consolidation That Reduces Your Total Monthly Payments

If you are carrying $40,000 in credit card debt, rolling it into a private second mortgage at a lower rate (OAC, rates subject to change, conditions apply) can cut your monthly interest cost substantially, even after accounting for fees. The math has to work for your specific numbers, and it should be calculated precisely with your broker, not estimated from an article.

Bridge Financing During a Life Transition

Divorce, estate settlement, business restructuring. These situations create temporary cash needs and temporary credit damage. A private mortgage bridges the gap while the situation stabilizes.

Preventing Power of Sale or Foreclosure

If your current lender has started power of sale proceedings because you have fallen behind on payments, a private mortgage can pay out the arrears and stop the process. Losing your home to power of sale is almost always more expensive than the cost of a private mortgage.

Property Investment with a Clear Timeline

Buying a property to renovate and sell (or refinance) within 12 months. The cost of the private mortgage is a business expense factored into the project budget.

When a Private Mortgage Does NOT Make Sense

When You Cannot Afford the Payments

This sounds obvious, but it happens. If the interest-only payments stretch your budget to the breaking point, taking on a private mortgage just digs the hole deeper.

When There Is No Realistic Exit Strategy

If your credit situation is unlikely to improve within 12 to 24 months (for example, you are mid-bankruptcy with years remaining, or your income is too unstable to ever qualify conventionally), a private mortgage just delays the problem and adds cost.

When the Fees Consume Your Equity

Using the illustrative example above, a one-year private mortgage can cost around $29,000 to $30,000 in interest and fees combined. If you renew for a second year and pay a similar amount again, two years of private lending can cost $60,000 or more. That is real equity lost, with nothing paid down on the principal.

When You Are Being Pressured by the Broker

If you feel rushed, confused, or pressured, stop. A legitimate mortgage transaction can wait for you to get independent advice.