When an Ontario homeowner is quoted private mortgage financing, the conversation often starts with the interest rate. That number matters, but it is not the whole cost. Lender fees, brokerage fees, legal and title costs, an appraisal, and later discharge or renewal charges can change how much is actually advanced, how much you owe on day one, and how much equity is left when a short term ends.
The Financial Services Regulatory Authority of Ontario (FSRA) treats private and alternative mortgages as a temporary option, often for one or two years, until you can qualify for a lower-cost product. FSRA also warns that these mortgages can come with higher interest rates and fees than a traditional mortgage, and that many of them are interest-only. If you only compare rates, you are not measuring the product FSRA is describing.
Why fees weigh more on a short private term
A five-year bank mortgage spreads many setup costs over a longer contract. A private mortgage is usually much shorter. FSRA describes it as a bridge, not a long-term home loan. Fees charged at funding, and again at discharge or renewal, are recovered over months rather than years. On an interest-only private mortgage you may not be reducing principal at all, so those fees sit on the balance or come out of your pocket at closing.
That is why FSRA tells borrowers to ask, before they sign, what costs and fees to expect now, during the loan, and at renewal; how those amounts are determined and paid; and whether the fees will change the loan amount. Ontario’s cost-of-borrowing rules use an annual percentage rate, or APR, to express more than interest. Under O. Reg. 191/08, the APR is meant to capture the cost of borrowing over the term, including certain fees. FSRA has told the industry that disclosing the rate alone is not enough. Compare the APR and the cash you must bring to closing, not only the rate.
Fee types you should see named, not buried
FSRA expects every fee to be explicitly named so you can tell a brokerage fee from a lender fee from an administrative charge. None of the descriptions below is a price list. Amounts vary by lender, property, and file. Ask for the actual figures in writing on your commitment and on the cost-of-borrowing disclosure.
Lender fees are charges the private lender imposes to place the mortgage. They may be deducted from the amount advanced, which means you may borrow more than you receive. Brokerage fees are what the mortgage brokerage charges for arranging the loan. Under O. Reg. 188/08, those fees must be disclosed in writing and included in the cost of borrowing and the APR. The same regulation requires written disclosure of remuneration payable to the brokerage by others, and of fees the brokerage pays to others, including who is paid and the basis for the amount.
Legal and title costs cover the lawyer who acts on the lender’s instructions, registration, and related disbursements. O. Reg. 191/08 includes, in the cost of borrowing, charges for a lawyer or notary hired by the lender and payable by the borrower. Appraisal fees appear when the lender requires a current valuation. Discharge fees are the cost of taking the charge off title when you pay the mortgage out. Renewal fees belong in a separate conversation: FSRA treats a renewal as a new transaction and has flagged buried renewal fees because they stop a borrower from comparing products and planning an exit. During the term, FSRA notes that private lenders can also charge fees for late payments, lapsed insurance, or property upkeep if they take over the property because mortgage terms were not met.
What Ontario law requires you to receive in writing
Private or alternative mortgages in Ontario must be arranged through a Level 2 mortgage agent or a mortgage broker. That licensee works under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA). Disclosures have to be in writing, in plain language, and presented so the required information is actually brought to your attention. FSRA has said jargon that obscures costs violates that requirement, and that burying renewal fees in fine print is not acceptable.
O. Reg. 188/08 generally requires disclosures at the earliest opportunity and no later than two business days before certain events, including entering the mortgage. O. Reg. 191/08 requires an initial cost-of-borrowing disclosure at least two business days before the earlier of making a payment other than a disbursement charge, entering the agreement, or incurring an obligation, unless you consent in writing to a shorter period. Use that window. Take the commitment and the disclosure to your own lawyer.
The initial disclosure for a fixed-amount mortgage must include the principal, the cost of borrowing in dollars, the interest rate, the APR if it differs from the rate, each payment, any brokerage charge included in the amount borrowed, the nature and amount of any non-interest charge, and the discharge charge as of the day the statement is given. Estimates are allowed only if they are reasonable and identified as estimates. FSRA examinations have found APR errors when required fees were left out — including administrative, lender, brokerage, legal, and appraisal fees — or when the commitment and the disclosure listed different amounts. If those two documents do not match, ask which figure you will actually pay.
Where the principal is $400,000 or less, O. Reg. 188/08 section 37 says a brokerage must not require, and must not accept, an advance payment or deposit for services to be rendered or expenses to be incurred. FSRA’s consumer page states that a brokerage may charge an up-front fee or retainer for loans above $400,000, that the fee should not be paid in cash, and that it must be paid to the brokerage, not the individual agent or broker. If someone asks for cash before you have written disclosure, pause. The Financial Consumer Agency of Canada (FCAC) requires federally regulated lenders, such as banks, to disclose non-interest charges, including discharge and appraisal fees. Those FCAC rights apply to federally regulated institutions, not private lenders. Hold the Ontario documents to the MBLAA standard: named fees, APR, and enough time to read them.
When fees are added to the loan, loan-to-value moves
FSRA asks borrowers a direct question: will these fees impact my loan amount? They can. Lender and brokerage fees may be added to the principal or deducted from the advance rather than paid in cash at closing. You may receive less than the face amount, or the registered loan may be higher than the cash you needed. Either way, the charge against the property is larger. Private lenders often look first at the property and at combined loan-to-value after all charges and fees. Adding fees to the mortgage raises that ratio. If the loan is interest-only, the extra principal is still there at maturity.
The figures in the next paragraph are a hypothetical example to show the arithmetic. They are not a quote, a typical fee, or an offer from any lender.
Suppose an Ontario home is valued at $800,000 and a private first mortgage of $480,000 is being discussed, which would be 60% loan-to-value before costs. If $12,000 of lender, brokerage, and legal fees were added to the loan instead of paid from other funds, the amount registered would be $492,000. Loan-to-value would then be $492,000 ÷ $800,000 = 61.5%. If unpaid taxes or another charge also had to be cleared from the same advance, the ratio would be higher still. A private lender may cap the loan, require cash for fees, or decline. Ask, in writing, which fees are deducted from the advance, which are added to the principal, which you must bring as certified funds, and what combined loan-to-value the lender is using after those items.
Discharge, renewal, and the cost of leaving
Because a private mortgage is a short-term product, the cost of getting out of it is part of the cost of getting into it. O. Reg. 191/08 requires the disclosure statement to state that there is a discharge charge and to give that amount as of the day of the statement. Discharge, legal work to pay out, and any prepayment clause in the charge can all appear on a payout statement. The same fee items can apply when the new charge is a private second mortgage behind an existing first.
Renewal is not automatic. FSRA says a private mortgage ends sooner than a traditional mortgage and that borrowers need an exit strategy that may include renewal options. A renewal is a new transaction: new disclosure, a fresh suitability assessment, and, often, a new appraisal and new fees. If the only way to repay is to renew with the same lender, you need that cost in writing before you take the first term. FSRA still asks: if you cannot qualify for a traditional mortgage at the end of the term, will this lender offer a renewal? What happens if you are late? An exit that depends on doubling your income in six months is not an exit FSRA would call realistic.
Suitability is more than a lower advertised rate
A cheaper-looking rate with heavier fees, or a higher rate with fees added to the loan, can both be the wrong product. Section 24 of O. Reg. 188/08 requires the brokerage to ensure the mortgage is suitable for your needs and circumstances. Material risks must be disclosed in writing, and you must acknowledge that disclosure. This article is only about the fee layer that sits on top of that product.
Comparing a private mortgage with a bank or credit-union mortgage is not only a rate comparison. Federally regulated lenders are expected to underwrite under OSFI’s residential mortgage guideline. OSFI’s rule does not directly apply to provincially regulated Ontario credit unions; their qualification requirements depend on applicable provincial requirements and their own underwriting policies. Private lenders set their own criteria and often lend primarily against property value. None of those channels is required to approve you. Suitability includes whether you can afford the payments, whether you understand renewal and discharge costs, and whether there is a credible path to a lower-cost mortgage before this term ends.
Questions to put in writing before you sign
Ask for answers on the brokerage’s letterhead or in the commitment, not in a phone summary. What is the interest rate, and what is the APR? Which fees are included in the APR? Name every lender fee, brokerage fee, legal item, appraisal, discharge, renewal, and administration charge, and say who receives each one. Will any fee be added to the loan or deducted from the advance? What cash is needed at closing? What combined loan-to-value is the lender using after fees?
What do I pay if I am late, if insurance lapses, or if I pay out before maturity? What is the discharge fee today? If this lender renews, what fees apply? How many business days do I have to run this by my own lawyer? If those answers are incomplete, the disclosure is incomplete. Do not sign a private mortgage you cannot explain in one page: rate, fees, cash to close, amount registered, payment, maturity, and the exit.
What to do next
Want to discuss private mortgage fees and what you would actually pay? Call Victor at 416-895-6074 or email victor@bestrefinance.ca.