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 exactly when a private mortgage makes 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 currently range from approximately 7.99% to 12.99%, depending on the loan-to-value ratio, the property type, the borrower's situation, and the specific lender.

What drives the rate:

• LTV under 65%: Rates at the lower end (7.99% to 9.99%). Lenders feel well-protected by the equity cushion.
• LTV 65% to 75%: Mid-range (9.99% to 11.99%). Still comfortable for most private lenders.
• LTV 75% to 80%: Higher end (11.99% to 12.99%). Fewer lenders compete at this level.
• Property type: Urban residential properties in the GTA, Ottawa, Hamilton, and London get the best 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.

Typical range: 1% to 3% of the mortgage amount.

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.

Typical range: 1% to 2% of the mortgage amount, though this varies by complexity.

At Good Home Capital, our brokerage fee is disclosed in writing before you sign anything. It appears on your commitment letter and on the FSRA-mandated Cost of Borrowing disclosure. There are no surprises.

Important: Under FSRA regulations, a brokerage must provide you with a written disclosure of all fees and the total cost of borrowing before you are committed. If any broker asks you to sign first and "we will sort out the fees later," that is a red flag. Walk away.

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.

Typical range:

• Borrower's legal fees: $1,200 to $2,500 (including disbursements and title insurance)
• Lender's legal fees (if separate): $800 to $1,500 (often charged back to the borrower)

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.

Typical range: $350 to $500 for a standard residential property. Complex or rural properties may cost $600 to $1,000.

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 example so you can see the complete picture.

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. Expressed as an effective annual cost, you are paying roughly 14.7% when you factor in all fees, not just the stated 9.99% interest rate.

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 is making an uninformed decision.

FSRA Disclosure Requirements: What Your Broker Must Tell You

The Financial Services Regulatory Authority of Ontario requires every mortgage brokerage to provide specific written disclosures before a borrower commits to a private mortgage. These include:

• Total cost of borrowing, expressed in dollar terms
• Annual percentage rate (APR), which includes fees, not just the stated interest rate
• All fees and charges broken down individually
• Key terms: rate, term, payment amount, payment frequency, maturity date
• Prepayment provisions (can you pay it off early? what is the penalty?)

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, FSRA requires written disclosure. A broker who says "we will get you the paperwork after" is violating their regulatory obligations.

Pressure to Close Immediately

"This lender will only hold this rate for 24 hours" is almost never true. Private lenders move at their own pace, and legitimate commitments have reasonable acceptance windows (typically 3 to 7 business days).

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. If combined lender and broker fees exceed 6% to 8% of the mortgage amount, ask hard questions. Compare with other brokerages.

When a Private Mortgage Makes Financial Sense

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

Debt Consolidation That Reduces Your Total Monthly Payments

If you are carrying $40,000 in credit card debt at 20% to 29% interest, rolling it into a private second mortgage at 10% to 12% can cut your monthly interest cost in half, even after accounting for fees. The math has to work, and it should be calculated precisely, not estimated.

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

If you refinance with a private lender, pay $30,000 in costs over a year, then renew for another year and pay another $30,000, you are burning through your home equity with nothing to show for it. Two years of private lending can cost $60,000 or more. That is real equity lost.

When You Are Being Pressured by the Broker

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