Canada's Private Lending Rules Every Ontario Borrower Should Know (2026)

A private mortgage isn't a last resort. For a lot of Ontario homeowners, it's a bridge - a way to get through a rough 12 months when the bank says no. Used right, it does exactly one job and then it's gone.

But the private space is where the widest gap sits between a fair deal and a predatory one. The good news: you don't need a licence to spot the difference. You need four rules.

These aren't buried in fine print. They're the consumer protections that already sit around every private mortgage arranged in Ontario. Know them, and you can read a term sheet the way a pro does.

If you're weighing a private option, it helps to first understand how private mortgage lenders in Ontario actually work, then come back to these guardrails. This post is the safety check, not the sales pitch.

Rule 1: There's now a legal ceiling on what any lender can charge you

As of January 1, 2025, the federal criminal interest rate dropped from 48% to 35% APR. That's the hard cap. Charge more, and it's a criminal offence - full stop.

Here's the part most borrowers miss. That 35% is all-in. It's not just the interest rate on the page. The APR (the true annual cost, including most fees) rolls in the lender fee, the brokerage fee, and other charges baked into the loan. So a mortgage advertised at "12%" can carry a much higher effective APR once the fees are counted.

On a big first mortgage, this rarely comes into play. On a small second mortgage, it absolutely can. Flat fees don't shrink just because the loan is small - so on a $40,000 second, a few thousand in fixed fees eats a large slice of the borrowing cost and pushes the effective APR up toward the ceiling.

What this means for you: on a small private second, do the all-in math, not the rate-on-the-page math. If the effective APR is brushing 35%, that's not a bridge - that's a signal to stop and get a second opinion.

A quick worked example

Say you take a $50,000 private second at 13% interest, one-year term, with a 3% lender fee ($1,500) and a 1.5% brokerage fee ($750), plus roughly $2,000 in legal and appraisal costs. Your interest for the year is about $6,500. Add the fees, and your all-in cost of borrowing for that year is closer to $10,750 - an effective annualized cost well above the 13% headline. Still legal, still potentially worth it as a short bridge. But you should see that number before you sign, not after.

Rule 2: A private mortgage can only be arranged by a licensed person - so check the licence

This one is a genuine safeguard, and it's easy to verify.

In Ontario, a private mortgage may only be arranged by a Level 2 licensed mortgage agent or a licensed mortgage broker. Not a "consultant." Not a friend of a friend with an investor. Not someone who found you through a lawn sign and works on a handshake.

Why Level 2 specifically? Private deals carry more risk, so the province requires a higher licensing tier to arrange them. That licence comes with obligations to you - disclosure, suitability, conduct standards - and a regulator (FSRA) that can act if those obligations are broken.

The practical move: ask for the agent's licence number and confirm it on FSRA's public registry. It takes two minutes. Anyone legitimate hands it over without blinking. Hesitation is your answer.

Rule 3: You get the full cost of borrowing in writing before you sign

You are entitled to a complete, written disclosure of what this mortgage costs - before you commit. Not a verbal summary. Not "we'll sort the fees at closing." In writing, in advance.

A proper disclosure spells out:

• The interest rate and how it's calculated.
• Every fee - lender fee, brokerage fee, legal, appraisal, administration. All of them, in dollars.
• The term - almost always around one year on a private deal, sometimes up to two.
• Prepayment and penalty terms - what it costs to pay this out early, which matters a lot if your exit comes sooner than planned.
• The APR - the all-in annualized cost that ties Rule 1 together.

If any of these are vague, missing, or "to be confirmed," that's not a paperwork delay. That's the deal telling you something. A fair private lender has nothing to hide in the numbers.

Rule 4: A private mortgage should be suitable - and have an exit

FSRA's expectation is plain: a private mortgage should be suitable for your situation, and it should come with an exit strategy. A private loan is a bridge, not a destination.

An exit strategy is simply the answer to "how does this end?" Usually one of three ways:

• You repair your credit over the term and refinance into a lower-cost B-lender or bank mortgage when the private term is up.
• You sell the property on your own timeline.
• A specific, dated event pays it off - a work bonus, a property sale, an inheritance, a business receivable.

The warning sign is a private mortgage arranged with no plan for what comes after month twelve. If nobody has talked to you about the exit, the deal isn't built to end - and renewing a high-cost private loan year after year is how a short-term bridge quietly becomes a long-term problem.

Put simply: a good private mortgage has a beginning, a middle, and a planned end. If yours only has a beginning, ask more questions.

Putting the four rules together

Here's the whole checklist in one place - the questions that separate a fair private deal from a predatory one.

Four clean answers, and you're likely looking at a fair deal. A dodge on any one of them is worth pausing over.

A private mortgage isn't good or bad on its own. It's a tool. These four rules are how you make sure it's being used on your side of the table.

None of this is legal advice. If you're dealing with a specific notice or contract and something feels off, talk to a lawyer - Legal Aid Ontario is a starting point if cost is a concern.

Frequently asked questions

Is 35% the interest rate I'll actually pay on a private mortgage?

No - 35% APR is the legal ceiling, not the going rate. Private first mortgages typically run roughly 8-12% and private seconds roughly 10-15%, plus fees. The 35% cap matters most on small second mortgages, where fixed fees can push the all-in APR up toward the limit. Always ask for the effective APR.

How do I check if a mortgage agent is properly licensed for private deals?

Ask for their licence number and confirm it on FSRA's public registry, which anyone can search. In Ontario, only a Level 2 licensed mortgage agent or a licensed mortgage broker can arrange a private mortgage. A legitimate agent will share their credentials without hesitation.

What fees should a private mortgage disclosure include?

All of them, in writing, before you sign: the interest rate, the lender fee (often around 1-4% of the loan), the brokerage fee (often around 1-2%), legal and appraisal costs of a few thousand dollars, the term, and any prepayment penalties. If a fee is vague or "to be confirmed at closing," treat that as a red flag.

How long does a private mortgage usually last?

Private terms are usually about one year, sometimes up to two, and interest-only payments are common. The point is to bridge a temporary gap - repair credit, sell, or wait for a specific payoff - and then move to lower-cost financing. A private mortgage with no exit plan is the arrangement to be cautious about.

Does RATECORE lend money or approve private mortgages?

No. RATECORE is a rate-comparison platform, not a lender or a brokerage. We help you compare options and connect with a licensed mortgage agent who can arrange financing and disclose the full cost in writing. We don't approve loans or guarantee any rate.