By Hami Tahm · Published September 2026 · Updated September 2026 · 11 min read
Private Mortgage Lenders in Canada: Rates, Fees, and When One Actually Makes Sense
What does a private mortgage lender cost in Canada, and when should you use one?
Private mortgage lenders in Canada charge roughly 7–12% on a first mortgage and 10–15%+ on a second, plus a one-time lender fee of 1–4% and a broker fee of 1–2% of the loan amount, on top of legal and appraisal costs. They underwrite primarily on the property's equity rather than your income or credit score, which is why they exist: for borrowers an A or B lender has turned down over recent self-employment, bruised credit, an already-maxed first mortgage, or a closing timeline too tight for conventional underwriting. A private mortgage is almost always short-term — 6 to 12 months — meant as a bridge to refinance into cheaper financing once your situation improves, not a long-term strategy.
Key Takeaways
- Private lenders underwrite on loan-to-value (property equity), not primarily on income or credit score — the opposite emphasis from a bank.
- Total cost stacks: interest (7–15%+) plus a one-time lender fee (1–4%) plus a broker fee (1–2%) plus legal and appraisal costs, all separate from the rate itself.
- Almost every private mortgage is short-term (6–12 months) — go in with a specific exit plan (refinance to an A/B lender, sell, or complete a renovation) before you sign.
- The mortgage broker arranging a private deal must disclose in writing who is paying them and how much before you sign, whether that's the lender or you.
- A private second mortgage can add financing without disturbing (or triggering a penalty on) an existing first mortgage — often cheaper in total than breaking and refinancing the whole loan.
Not sure you actually need a private lender?
Private financing is expensive by design — confirm you don't qualify at an A or B lender first. See how to qualify for a mortgage in Canada for the credit, income, and GDS/TDS thresholds conventional lenders use, then run your numbers through the mortgage qualifier calculator to see where you actually land.
This page is for informational purposes only and does not constitute financial or mortgage advice. Private lending terms, rates, and fees vary widely by lender and by deal — confirm current terms with a licensed mortgage broker before signing anything.
What Is a Private Mortgage Lender?
A private mortgage lender is an individual investor, a small group of investors, or a Mortgage Investment Corporation (MIC) that funds mortgages using its own or pooled investor capital — outside both traditional bank/credit-union ("A") lending and alternative ("B") lender financing. (Note: "monoline" describes a lender's structure — mortgage-focused, no bank branches — not its risk tier; several monoline lenders do prime "A" lending.) Where an A-lender's underwriting starts with your income, credit score, and debt ratios, a private lender's underwriting starts with the property: how much verifiable equity is in it, and what happens if you default and the lender has to sell it. That single difference in emphasis explains almost everything else about how private lending works.
What a Private Mortgage Actually Costs
The rate is only part of the cost. A private mortgage stacks several charges that a conventional mortgage either doesn't have or bundles differently.
| Cost Component | Typical Range | When It's Charged |
|---|---|---|
| Interest rate — first mortgage | 7% – 12% / year | Ongoing, for the term of the loan |
| Interest rate — second mortgage | 10% – 15%+ / year | Ongoing, for the term of the loan |
| Lender fee | 1% – 4% of loan amount | One-time, deducted from funds at closing |
| Broker fee (if applicable) | 1% – 2% of loan amount | One-time, deducted from funds at closing |
| Legal fees (both sides) | $1,500 – $2,500 | One-time, at closing |
| Appraisal | $400 – $800 | Upfront, before approval |
Worked example
A $300,000 private first mortgage at 9% interest, with a 3% lender fee and a 1.5% broker fee, costs roughly $27,000 in interest over one year, plus $13,500 taken off the funds advanced at closing — meaning you'd actually receive about $286,500 to fund a $300,000 loan. Compare that to a conventional mortgage at a fraction of the rate with no lender or broker fee at all before deciding whether the speed and flexibility are worth the premium for your situation.
When a Private Lender Makes Sense (and When It Doesn't)
Private lending exists to solve specific, usually temporary problems — not to replace a bank for a borrower who could otherwise qualify.
| Situation | Why an A-Lender Says No | Private Lender's Angle |
|---|---|---|
| Recently self-employed (< 2 years) | No 2-year Notice of Assessment history to average | Lends against property equity, not documented income history |
| Bruised or thin credit | Below the lender's minimum credit score threshold | Underwrites primarily on loan-to-value, not credit score |
| Existing mortgage already maxed | Refinancing the first mortgage would trigger a penalty or exceed 80% LTV | A private second mortgage adds financing without touching the first |
| Raw land or a mid-renovation property | Banks generally won't lend on unfinished or non-conforming property | Property-focused lenders are often willing to finance the interim state |
| Tight closing timeline | A-lender underwriting can take weeks | Private funding can often close in days |
If none of these apply to you — you have two years of documented income, reasonable credit, and normal timelines — a private mortgage is almost certainly the wrong tool. Start with the mortgage qualifier calculator to confirm where you stand before shopping private rates.
Private First Mortgage vs. Private Second Mortgage vs. HELOC
A private first mortgage replaces your entire mortgage with a private loan — usually only when you can't qualify anywhere else for the full amount. A private second mortgage sits behind your existing (often much cheaper) first mortgage and adds financing without touching it, which is frequently the lower-total-cost option if your first mortgage is already at a good rate you don't want to break. If you have significant home equity and reasonable credit, a HELOC or a conventional second mortgage from a bank or credit union is worth ruling out first — it's a fraction of the cost of a private second mortgage when you qualify for it.
Every Private Mortgage Needs an Exit Plan
Private mortgages are almost always 6-to-12-month terms, occasionally extended to two years. They're built as a bridge — to sell the property, to complete a renovation that then qualifies for conventional financing, or to give your income or credit file time to meet an A or B lender's requirements — not as a place to park long-term financing. Before you sign, have a specific, dated plan for how you get out of the private rate, and check what it would cost to exit early using the mortgage penalty calculator — many private mortgages carry their own prepayment or exit terms that differ from a conventional mortgage's three-months'-interest or IRD formula.
Regulation and Fee Disclosure
Individual private lenders and MICs are not regulated the same way as a bank or credit union, but the mortgage broker arranging the deal is licensed and regulated provincially — by FSRA in Ontario, for example, with equivalent regulators in every other province — and is required to disclose in writing, before you sign, exactly who is paying them and how much. Disclosure rules are set and enforced provincially, not by a single national regulator, so the exact requirements vary somewhat by province; confirm your broker's specific obligations with their licensing regulator. That disclosure obligation doesn't change on a private deal; if anything, confirm it more carefully, since broker fees on private mortgages are typically paid by the borrower rather than the lender — the reverse of how most conventional mortgages work. See our companion guide on how mortgage brokers get paid in Canada for the full breakdown of lender-paid versus borrower-paid compensation.
Also budget for closing costs beyond the mortgage itself. If the private mortgage is financing a property purchase, legal fees, land transfer tax, and title insurance apply the same as they would on any purchase — run the full picture through the closing cost calculator before you commit. A private second mortgage or a refinance on a property you already own is different: no ownership changes hands, so land transfer tax generally doesn't apply — you're mainly budgeting for the lender/broker fees above plus legal and appraisal costs.
▶ Confirm your options before you shop private rates
- Mortgage Qualifier CalculatorSee what you'd actually qualify for at a conventional lender first.
- HELOC & Second Mortgage CalculatorCompare a conventional HELOC or second mortgage against a private one.
Frequently Asked Questions
This page is for informational purposes only and does not constitute financial or mortgage advice. Private lending terms, rates, and fees vary widely by lender and by deal — confirm current terms with a licensed mortgage broker before signing anything.
Sources
- Financial Consumer Agency of Canada — Working with a Mortgage Broker
- FSRA (Ontario) — Mortgage Brokerage Disclosure Requirements
- CMHC — Mortgage Loan Insurance
▶ Related mortgage guides
- How to Qualify for a Mortgage in CanadaCredit score, GDS/TDS ratios, and the stress test conventional lenders use.
- How Mortgage Brokers Get Paid in CanadaLender-paid vs. borrower-paid commission, and what to check before you sign.
- Guided Homeowner JourneyCompare renewal, refinance, and HELOC options with your real numbers.