How Much Does a Private Mortgage Actually Cost in Ontario? A Full Fee Breakdown

Someone quotes you a private mortgage at 11%. You do the quick math in your head, decide you can live with it, and move on. Then the commitment letter arrives, and there's a lender fee, a brokerage fee, a legal bill, an appraisal. Suddenly the number in your head and the number on paper aren't the same conversation.

That gap is where most people get surprised. Not because anyone hid anything — every one of those fees is disclosed in writing before you sign — but because nobody sat them down and added it all up.

So let's add it all up. Line by line, with real dollars.

Why a private mortgage costs more than a rate

A private mortgage is a short-term loan, usually secured against the equity in your home, from an individual investor, a syndicate, or a Mortgage Investment Corporation (MIC). People turn to them when a bank or a B lender says no — after a credit event, during a period of self-employment that's hard to document, or when a deal has to close faster than a traditional lender can move.

Here's the thing. That lender is taking on more risk and doing more manual work than a bank ever would. There's no algorithm rubber-stamping the file. Someone is reading your actual situation, ordering an appraisal, and deciding to lend on equity rather than on a perfect credit score. The term is short — often just one year — so the lender has to make the file worthwhile over twelve months, not twenty-five years.

That's what the fees pay for. They're the price of speed, flexibility, and someone underwriting by hand. If you understand that, the rest of this stops feeling like a trap and starts feeling like a trade-off you can actually weigh.

If you're still deciding whether this route makes sense at all, our overview of how private mortgage lenders in Ontario work is the better place to start — this post is about the money, once you've decided to look.

The five line items on almost every private mortgage

Nearly every private deal in Ontario breaks down into the same handful of costs. Ranges below are typical and move with the market — treat them as a map, not a quote.

• The interest rate. A private first mortgage typically runs roughly 8–12%; a private second (behind an existing first) typically runs roughly 10–15%. Interest-only payments are common, which keeps the monthly number lower than you'd expect.
• The lender fee. A one-time fee the lender charges to put the deal together — typically around 1–4% of the loan amount. It's usually deducted from the funds you receive or added to the mortgage balance.
• The brokerage fee. Paid to the licensed mortgage agent who arranges the deal, often around 1–2% on a private file, always disclosed in writing before you sign. On some files the lender fee and brokerage fee are quoted together.
• Legal fees. Private lenders use their own lawyer to register the mortgage, and you typically pay for both their legal work and your own — usually a few thousand dollars in total.
• The appraisal. Because the loan is based on your home's value, the lender orders an independent appraisal. Usually a few hundred dollars.

Two of those — the lender fee and the brokerage fee — are the ones people forget to count. They're also the ones most often folded into the mortgage rather than paid out of pocket, so you feel them as a smaller loan advance, not a bill.

A worked example: a $75,000 second mortgage

Let's make it concrete. Say you own a home in Ontario, you've got an existing first mortgage, and you need $75,000 — to consolidate high-interest debt and get some breathing room while you rebuild your credit. A private second mortgage funds it. Here's a realistic all-in picture over a one-year term.

Cost	Basis (illustrative)	Amount
Interest (one year)	12% on $75,000, interest-only	$9,000
Lender fee	~3% of the loan	$2,250
Brokerage fee	~2% of the loan	$1,500
Legal (lender's + yours)	Registration + review	$2,500
Appraisal	Independent valuation	$400
Approximate total cost, 12 months		~$15,650

So the real cost of that $75,000 over the year is roughly $15,650 — not the $9,000 the rate alone suggested. The fees nearly doubled it. On a small, short loan, that's normal, and it's exactly why the all-in number matters more than the headline rate.

Notice the shape of it, though. Most of those costs are one-time. If you carried the same loan into a second year at the same rate, you'd pay the $9,000 in interest again but not the fees. Which is the whole point of a private mortgage: it's meant to be short.

How the 35% criminal-rate cap protects you

There's a real guardrail here, and it matters most on exactly the kind of small loan above. As of January 1, 2025, Canada's criminal interest rate is 35% APR — annualized and all-in. That cap counts not just interest but most fees folded into the effective annual rate.

Why does that matter on a $75,000 loan? Because flat fees are a bigger slice of a small loan than a large one. On our example, once you roll the lender fee, brokerage fee, and other costs into an annual percentage rate, the effective APR sits well above the 12% headline — that's just what fees do to a small, one-year loan. The cap is the ceiling that keeps those all-in costs from running away on the smallest files.

It also tells you what to ask for. A legitimate private deal is quoted as a rate plus fees, disclosed in writing, with the APR spelled out — never a vague single number and never a promise. If someone can't show you the all-in figure, that's your signal to slow down.

A $400,000 private first: the fees shrink in proportion

Now flip the size. Say you need a private first mortgage of $400,000 — maybe a bridge to close a purchase while you sort out longer-term financing. Same fee percentages, very different feel.

Cost	Basis (illustrative)	Amount
Interest (one year)	9% on $400,000, interest-only	$36,000
Lender fee	~2% of the loan	$8,000
Brokerage fee	~1% of the loan	$4,000
Legal + appraisal	Roughly fixed costs	$3,500
Approximate total cost, 12 months		~$51,500

The dollar figure is bigger, but as a share of the loan the fees are much smaller — because legal and appraisal costs barely change whether the mortgage is $75,000 or $400,000. The larger the loan, the more the rate drives the cost and the less the flat fees do. That's the quiet math behind why small second mortgages feel expensive and larger first mortgages feel more like the rate you were quoted.

Think of it as a bridge, and plan the exit before you start

A private mortgage isn't meant to be where you live. It's meant to be how you get across.

The borrowers this works well for have an exit in mind on day one: refinance into a B lender once the credit rebuilds, sell a property, finish a renovation and re-appraise, or clear the debt that was dragging the file down. The one-year term isn't a bug — it's a deadline that keeps everyone honest about the plan.

The borrowers it goes badly for are the ones who renew it, and renew it again, treating a bridge as a destination. Paying the interest year after year with no exit is how a smart short-term tool turns into an expensive long-term habit.

One more consumer-protection point worth knowing: in Ontario, a private mortgage can only be arranged by a Level 2 licensed mortgage agent or a mortgage broker. That's not red tape — it's the person legally responsible for disclosing every fee above to you in writing before you sign anything.

Frequently asked questions

Are private mortgage fees paid upfront or added to the loan?

Most often they're added to the mortgage or deducted from the funds you receive at closing, so you rarely write a cheque out of pocket. Either way, every fee must be disclosed to you in writing before you sign the commitment. Ask for the total advance and the net amount you'll actually receive — the difference is the fees.

Do the fees count toward the interest rate?

Yes. Under Canada's criminal-rate rules, most fees are counted in the annualized, all-in APR — and that combined figure can't legally exceed 35%. On a small, short loan the fees can push the effective APR well above the headline rate, which is exactly why you should ask to see the APR, not just the rate.

Why is a private second mortgage more expensive than a first?

A second mortgage sits behind the existing first, so if anything goes wrong the second lender gets paid only after the first is fully repaid. That extra risk is priced in — private seconds typically run roughly 10–15%, versus roughly 8–12% on a private first.

How long should I keep a private mortgage?

As short as your plan allows. Terms are usually one year, sometimes up to two, and the goal is to use that window to fix whatever kept you out of a bank or B lender — then refinance into lower-cost financing. Carrying it for years without an exit is where the cost adds up.

Can I get out of a private mortgage early?

Often yes, though many private mortgages carry a minimum interest period or a prepayment charge, so check the commitment for how early repayment is treated. If your exit — a sale, a refinance, a lump sum — might come before the term ends, raise it with your mortgage agent up front so the terms fit the plan.