The True Cost of Private Mortgages: Fees & Hidden Charges Explained
Private Mortgage Costs Beyond Interest Rates
When Canadians turn to private mortgages, it’s often because they need flexible, fast financing—especially if traditional banks have turned them away. But while most borrowers focus on the interest rate, they often overlook the true cost of borrowing, which includes a range of fees, penalties, and charges that can add thousands of dollars to your mortgage.
In this guide, we’ll break down everything you need to know about private mortgage fees in Canada—including lender and broker fees, legal and appraisal costs, renewal fees, and more. We’ll also share tips to minimize those expenses so you can borrow smart and budget accurately.
Why Private Mortgages Cost More Than You Think
Unlike traditional lenders, private mortgage lenders operate outside the major banks and aren’t subject to the same federal lending guidelines. Because they often take on higher-risk borrowers—people with bad credit, unstable income, or unique property types—they charge additional fees to offset their exposure and cover third-party service costs.
These home loan expenses are often disclosed in the commitment letter, but not every borrower reads the fine print. That’s why it’s critical to understand what you’re actually paying for—before you sign.
Breakdown of Common Private Mortgage Fees in Canada
Here’s a complete look at the most common (and often overlooked) fees involved in a private mortgage:
1. Lender Fees
Private lenders typically charge a lender fee—sometimes called a lender placement fee or funding fee—as compensation for approving and providing the funds.
🔹 Average Range: 1% to 3% of the total loan amount
This fee may be deducted from your loan proceeds at funding. For example, if you’re approved for $200,000 with a 2% lender fee, $4,000 is withheld, and you receive $196,000.
⚠️ Tip: Always clarify whether this fee is deducted from the loan or added on top.
2. Broker Fees
If you’re working with a mortgage broker, you’ll also pay a brokerage fee—especially in private lending where brokers play a critical role in matching borrowers with suitable lenders.
🔹 Average Range: 1% to 2.5%
This fee is usually disclosed upfront in the commitment or mortgage agreement and varies depending on the:
- Loan size
- Borrower profile
- Complexity of the deal
Some brokers are paid by the lender; others bill the borrower directly. Ask for clarity on how your broker is compensated.
3. Legal and Appraisal Fees
Legal and appraisal costs are often separate from your mortgage fees, but they are unavoidable and must be paid during closing.
Legal Fees:
- You’ll need a lawyer to review the agreement, handle mortgage registration, and disburse funds.
- Some lenders require you to cover their legal fees as well.
🔹 Average Legal Costs: $1,500 to $3,000+
Appraisal Fees:
- A certified appraisal is usually required to confirm property value and condition.
- Some lenders have preferred appraisers, which may expedite the process but come with fixed pricing.
🔹 Average Appraisal Costs: $350 to $700 (more for rural or commercial properties)
4. Renewal Fees
Since most private mortgages are short-term (6 to 24 months), you may need to renew the mortgage if you’re not ready to refinance or repay at the end of the term.
🔹 Average Renewal Fee: 1% to 1.5% of the outstanding mortgage balance
Some lenders may also charge an administration fee on top of the renewal fee. Always check your original agreement for automatic renewal clauses and fees.
📌 Important: Failing to refinance or renew on time could lead to higher fees—or even foreclosure.
5. Early Repayment Penalties
Thinking of paying off your private mortgage early? While that sounds smart, you may face prepayment penalties unless your contract includes flexible terms.
🔹 Common Prepayment Clauses:
- 3-month interest penalty
- Flat fees ranging from $1,000 to $3,000
- No prepayment allowed for the first 3–6 months
Some lenders offer interest-only terms with no penalty after a set period, but others impose strict fees to protect their return.
💡 Tip: Ask your lender upfront about prepayment options—and get it in writing.
6. Other Potential Charges to Watch For
- Discharge Fee: Charged when removing the lender’s name from title (typically $300–$500)
- Late Payment Fees: Fixed or daily penalty amounts for missed payments
- NSF Fees: Charges for bounced payments (often $100–$150)
- Mortgage Administration Fees: Monthly charges for managing the loan (especially for MICs or syndicated lenders)
The Real Cost: Sample Private Mortgage Cost Breakdown
Let’s say you’re borrowing $300,000 through a private lender with a 12-month term.
| Fee Type | Estimated Amount |
| Lender Fee (2%) | $6,000 |
| Broker Fee (2%) | $6,000 |
| Legal Fees | $2,000 |
| Appraisal | $500 |
| Renewal Fee (1%, if needed) | $3,000 |
| Total Fees (not including interest) | $17,500 |
⚠️ That’s almost 6% of the loan amount in fees—on top of your interest payments.
Tips to Minimize Private Mortgage Costs
✅ 1. Compare Multiple Lenders
Work with a broker who can present offers from several private lenders—including lender fees and hidden charges. Don’t choose based on rate alone.
✅ 2. Ask About Fee Caps
Negotiate maximum fee limits where possible, especially on renewals, legal reimbursements, or discharge costs.
✅ 3. Read the Commitment Letter Carefully
Ask your lawyer to explain all costs outlined in the commitment before signing.
✅ 4. Plan Your Exit Strategy
The faster you repay or refinance into a lower-rate product (like a traditional mortgage), the less you’ll pay in ongoing fees and interest.
✅ 5. Watch for “Double Fees”
Some disreputable brokers may charge both you and the lender. Ask who pays what—and get confirmation in writing.
Conclusion: Budgeting for a Private Mortgage
If you’re considering a private mortgage in Canada, understanding the full cost of borrowing is just as important as qualifying for the loan. While private loans are fast and flexible, they come with significant fees that can impact your budget—especially if you’re not prepared.
By understanding and budgeting for:
- Lender and broker fees
- Legal and appraisal costs
- Renewals and prepayment penalties
- Other administrative charges
—you can make informed decisions, avoid surprises, and ensure your private mortgage is a smart short-term strategy rather than a financial burden.
✅ Ready to Explore Transparent Private Lending?
Don’t let hidden fees derail your financing plans.
👉 Talk to the experts at Equity Mainly Matters to get a clear breakdown of costs, rates, and repayment terms before you commit.
Your home deserves more than just approval—you deserve clarity and control over your mortgage experience.