What a Private Mortgage Actually Costs in Canada

Cost breakdown, September 21, 2026. A private mortgage quoted at 10.99% does not cost you 10.99%. On an illustrative $150,000 second-position private mortgage over a one-year term, a 2% lender fee and a 2% broker fee add $6,000, and legal, appraisal, title and discharge charges add roughly $2,650 more. The true private mortgage cost lands near 16.76% annualized once every line is counted. That all-in figure, not the headline rate, is what belongs beside an A-lender quote of roughly 4.04% to 4.49%.

Below: each cost line, the arithmetic on one-year and six-month terms, why interest-only payments leave your balance where it started, and the exit plan that decides whether the spend was worth it.

Every figure here is an illustrative worked example with stated assumptions, not a market quote. Anyone searching private mortgage rates Canada finds ranges rather than quotes, and that is honest: pricing varies widely by file, position, loan-to-value and province. Get your own fee schedule in writing before you commit.

Where the private mortgage cost actually comes from

A private mortgage is funded by an investor, a mortgage investment corporation or a syndicate rather than a bank, and is underwritten on the property and the exit rather than your income — the full comparison is in A Lender vs B Lender vs Private Lender in Canada. What matters for cost is the charges an A renewal does not carry:

• The private mortgage interest rate. Usually interest-only, quoted annually, set by position and loan-to-value rather than by your beacon.
• The lender fee, or points. A percentage of the loan paid for placing the money — commonly 1% to 3%, netted off the advance rather than paid out of pocket.
• The broker fee. A separate percentage to the brokerage for sourcing and packaging the deal, often the larger of the two on small files.
• Legal fees. The lender's solicitor registers the charge; your own lawyer gives independent advice. Two bills, not one.
• Appraisal and title insurance. The loan is secured on the property, so a current appraisal is close to mandatory and a title policy is usually a funding condition.
• The discharge or renewal fee at maturity. Terms are typically one year. At maturity you either pay out and pay a discharge fee, or renew and pay a fresh lender fee.

A worked example: $150,000 in second position for one year

Assumptions: a $150,000 private second behind an existing first, a 10.99% interest-only rate, a 2% lender fee, a 2% broker fee, a one-year term, typical Ontario closing charges.

Cost line	Assumption	Amount
Interest (12 months, interest-only)	10.99% on $150,000	$16,485.00
Lender fee	2.00% of the loan	$3,000.00
Broker fee	2.00% of the loan	$3,000.00
Legal (lender's solicitor plus your own)	Illustrative	$1,500.00
Appraisal	Illustrative	$500.00
Title insurance	Illustrative	$350.00
Discharge fee at maturity	Illustrative	$300.00
Total cost of credit, 12 months		$25,135.00
Headline rate	As quoted	10.99%
Fees, annualized over 12 months	$8,650 on $150,000	5.77%
Effective annualized cost	$25,135 on $150,000	16.76%

Read the last three rows together. The quoted rate is 10.99%, and the fees add 5.77 percentage points once spread over the twelve months you hold the money. The private mortgage cost on this file is 16.76% — roughly 12.7 points above the 4.04% best insured five-year fixed available now, more than three times it rather than the 2.5x the headline implies.

The fees also usually come off the advance. Register a $150,000 charge, net out $8,350 of closing costs, and you receive about $141,650 — against the cash that reaches you, the same year costs 17.74%. The payment is $1,373.75 a month either way, because interest is charged on the registered $150,000, not on what you received.

Why a six-month term makes the same private lender fees hurt twice as much

Fees are charged once, up front, regardless of term. Interest accrues monthly. So the shorter the term, the less room to spread the fees — the fee load doubles in annualized terms when the term halves.

Same file, two term lengths	12-month term	6-month term
Interest paid (10.99%, interest-only)	$16,485.00	$8,242.50
Fees and closing costs (identical)	$8,650.00	$8,650.00
Total cost of credit	$25,135.00	$16,892.50
Headline rate	10.99%	10.99%
Fee load, annualized	5.77%	11.53%
Effective annualized cost	16.76%	22.52%
Effective annualized cost on net advance	17.74%	23.85%

A six-month term is cheaper in dollars — $16,892.50 against $25,135.00 — and far more expensive as a rate. That is the point, not a contradiction. Close a sale or a refinance in month five and the shorter term saves $8,000. Take six months hoping to be out, then need two renewals, and you pay the lender fee three times on the same $150,000, with the annualized cost of a private mortgage landing north of 22%.

Interest-only payments mean your balance does not move

Almost every private mortgage is interest-only. On this file you pay $1,373.75 a month and at maturity you owe $150,000 — exactly what you borrowed. Twelve payments totalling $16,485 bought time, not equity.

That is not a defect: a lender writing a one-year charge has no use for a 25-year amortization, and you have no reason to pay down principal at 16.76% a year. But it changes how you read the file. An A-lender payment is partly savings; a private payment is entirely rent. Your loan-to-value only improves if the property appreciates, so do not count on a shrinking balance to qualify you for cheaper money next year, and every month past the plan is pure private mortgage cost.

The exit plan matters more than the rate

A private mortgage is a bridge, not a destination. The question that decides whether the money was well spent is not "what rate did I get" but "what gets me out in twelve months, and at what cost". Three exits work:

• Repair the file, then move to a B lender. Clear the arrears, build twelve months of clean history, refinance into alternative pricing — B Lender Mortgages in Canada covers what that tier costs.
• Sell. If the property is listed or will be, the mortgage is carrying cost until closing. Check local days-on-market before signing a six-month term.
• Refinance the structure. Where a private second exists to clear high-interest consumer debt, the exit is often one consolidating first mortgage once credit recovers — Refinancing to Consolidate Debt in 2026 shows when that math works.

Write the exit down with a date and a dollar figure before you fund. If you cannot, you are not bridging to anything — you are renting money at 16% or more, roughly $25,000 a year here.

Red flags when you are quoted private lender fees

• The fees exceed the benefit. Borrow $40,000 with $4,000 of combined fees plus $2,500 of closing costs and you have paid 16% of principal just to access it, before any interest. Below roughly $50,000, price it line by line.
• No fee schedule in writing before commitment. A legitimate lender or brokerage puts the rate, lender fee, broker fee, term, payment, renewal and discharge cost on paper in advance. If a fee first appears at the lawyer's office, walk away.
• No articulated exit. If nobody can say what refinances this in twelve months, the plan is a renewal and a second lender fee.
• Fees collected before funding. Paying the appraisal up front is routine; lender or broker fees taken before funding are not.
• A term shorter than your plan. Six months against a nine-month exit is a guaranteed renewal fee.

Common questions

How much does a private mortgage cost in Canada?

There is no single market number — pricing is set file by file on position, loan-to-value, property type and province. The structure is consistent: an interest-only rate, a lender fee of roughly 1% to 3%, a broker fee often similar, plus legal, appraisal, title and discharge charges. On the illustrative $150,000 one-year second above, the total cost of credit is $25,135, or 16.76% annualized, against a quoted 10.99%.

Why are private lender fees charged upfront?

Because the term is short and the return has to be earned inside it. A one-year charge gives an investor twelve payments and no certainty of renewal, so part of the compensation is taken at funding rather than built into the rate. The fee also pays for underwriting a file a bank declined. The cost is front-loaded and non-refundable: pay out in month three and you do not get 75% of the lender fee back, which is why a short hold produces such a high annualized private mortgage cost.

How long should I stay in a private mortgage?

Long enough to execute the exit and not one term longer. For most borrowers that is twelve to twenty-four months: a year to repair whatever disqualified you, then a move to a B lender or back to an A lender. Renew the example file once at a 2% lender fee plus a 1% renewal broker fee and two years costs about $46,420 all in, or 15.47% a year. Past that the cycle compounds — each renewal brings a fresh lender fee while the balance has not moved. A third renewal means the file needs a different solution, not another term.

What to do next

• Ask for the full fee schedule in writing — rate, lender fee, broker fee, legal, appraisal, title, renewal, discharge — before signing a commitment.
• Add it up and divide by the term for your own effective annualized figure. That is the number to compare, not the quoted rate.
• Write your exit on one line: what happens, by what date, at what cost.
• Match the term to that date with a few months of margin, so you do not buy a renewal fee you did not plan for.
• Confirm you have genuinely been declined where it matters. With the best insured five-year fixed around 4.04% and the best five-year variable near 3.35% to 3.49%, the gap to a private second is enormous, and plenty of files that feel unbankable are not.

Fixed rates have moved up roughly half a point on the recent run in bond yields, pushing some borrowers toward alternatives they may not need — the detail is in Rate Alert: Fixed Mortgage Rates Are Rising in Canada. Before accepting private terms, compare what the whole market will do for your file. RateShop.ca is Canada's independent mortgage shopping and comparison marketplace, so you can put A lenders, B lenders and private options side by side instead of taking the first offer that comes back with a yes.