Private mortgage rates in Canada: the fees that matter more than the rate
Private mortgage rates get the attention, but fees, interest-only payments and how soon you exit often decide what you actually pay. Here's what drives private mortgage pricing in Canada, how to turn a quote into an all-in annual cost, and a worked example where the lower rate costs more.
Private mortgage rates in Canada are usually well above bank and B-lender rates, and FSRA notes private mortgages often come with higher fees, shorter terms and interest-only payments. Because most fees are paid up front, the quoted rate can understate the real cost, especially if you exit early. Add the interest you'll pay over the term to every fee, divide by the amount borrowed and the years, and compare that all-in cost. In our illustration on $150,000 for 12 months, a 9.99% loan with 4% in fees costs about $23,500, more than an 11.49% loan with 1.5% in fees at about $22,000, and the gap widens if you exit after 6 months.
Key takeaways
- →The rate is only part of the price. Lender and brokerage fees, legal costs and interest-only payments often matter more on a one-year private loan.
- →Compare the all-in cost: interest over the term plus every fee, divided by the amount borrowed and the years.
- →A lower rate can cost more. In our $150,000 example, 9.99% with 4% fees costs about $1,500 more over 12 months than 11.49% with 1.5% fees.
- →Up-front fees punish early exits. Pay off after 6 months and the all-in cost of the high-fee loan jumps to about 21% a year.
- →8Twelve doesn't lend or fund private mortgages; we arrange them with third-party lenders and disclose every fee in writing first.
Short answer: Private mortgage rates in Canada are usually well above bank and B-lender rates, and the rate is only part of what you pay. FSRA notes that private mortgages can come with higher interest rates, higher lender fees or commissions, shorter terms and interest-only payments [1]. Because most fees are charged up front, the true yearly cost of a short private loan can be several points higher than the quoted rate. The way to compare offers is the all-in cost: total interest over the term plus every fee.
This guide explains what drives private mortgage pricing, how to turn any quote into an all-in cost, and a worked example where the lower rate costs more. If you're weighing every way to borrow against your home, start with our equity takeout options.
What drives private mortgage rates?
Private lenders include individuals, mortgage investment corporations (MICs) and private companies [1]. FSRA says they often lend based on the value of your property rather than your income [1], so pricing follows the lender's risk on the property and the exit:
- Loan-to-value (LTV). The less equity left after the loan, the higher the rate and fees, in our experience.
- First or second position. A second mortgage ranks behind your first mortgage, so it's riskier for the lender and usually priced higher [2].
- Property type and location. Urban detached homes are usually easier to price than rural, unique or hard-to-sell properties.
- The exit plan. A clear plan to refinance with a bank or B-lender, or to sell, can improve your terms. FSRA says you need a realistic exit strategy [1].
- Term and payment type. Most private loans are short, and many are interest-only, so your balance doesn't go down [1].
In our experience, private mortgage rates are commonly in the high single digits to mid-teens, depending mainly on position and LTV. That's our general market observation, not a published benchmark, and your quote can be higher or lower.
The fees that come with a private mortgage
FSRA notes that private mortgage fees are often higher than with a traditional mortgage, and private lenders can charge fees for late payments, lapsed insurance or property upkeep [1]. The usual cost layers are:
- A lender fee for making the loan, often deducted from the money you receive.
- A brokerage fee for arranging a private loan.
- Legal fees, often for your lawyer and the lender's lawyer.
- An appraisal to confirm the property's value.
- Renewal and discharge fees if the loan is renewed or paid out.
If you're in Ontario, our guide to private mortgage refinance fees and red flags sets out typical ranges and your written-disclosure rights. The rest of this guide focuses on one thing: turning those fees and the rate into a single comparable number.
Got a private mortgage quote? A licensed 8Twelve agent can work out the all-in cost and check whether a bank or B-lender could do it for less, across 65+ lenders, at no cost to you, OAC. Compare your options
How to work out the all-in cost of a private mortgage
- Interest over the term: loan amount × rate × the months you expect to keep it ÷ 12 (for an interest-only loan).
- Add every fee: lender fee, brokerage fee, legal, appraisal and any other charge in the quote.
- Divide by the loan amount, then by the years you'll have it. That's your all-in yearly cost.
Ask for the annual percentage rate (APR) or cost of borrowing in the written disclosure too, but run this check yourself for the time you actually expect to keep the loan.
Worked example: the lower rate costs more
Illustration: you need $150,000 in a private second mortgage for 12 months, interest-only. Two offers (assumptions for illustration, not quotes), each with about $2,500 in legal and appraisal costs:
| Offer A | Offer B | |
|---|---|---|
| Rate | 9.99% | 11.49% |
| Lender and brokerage fees | 4% ($6,000) | 1.5% ($2,250) |
| Monthly interest-only payment | about $1,249 | about $1,436 |
| Interest over 12 months | about $14,985 | about $17,235 |
| Fees, legal and appraisal | $8,500 | $4,750 |
| All-in cost, 12 months | about $23,485 | about $21,985 |
| All-in yearly cost | about 15.7% | about 14.7% |
| All-in cost if you exit after 6 months | about $15,990 (about 21.3% a year) | about $13,370 (about 17.8% a year) |
Illustrative only, not an offer. Interest-only, simple monthly interest; calculated in Python. Your lender's interest calculation, fees and penalties may differ.
What it shows: Offer A has the lower rate but costs about $1,500 more over 12 months, and about $2,600 more if you refinance out after 6 months, because the fees are paid either way. If the fees are deducted from your advance, Offer A would also put less cash in your hands: about $141,500 versus $145,250.
Questions to ask before you compare private mortgage rates
FSRA suggests asking your broker or agent these questions, among others [1]:
- Why are you recommending an alternative or private mortgage and not a traditional one?
- What costs and fees can I expect now, during the loan and at renewal, and will they reduce my loan amount?
- What happens if I'm late on a payment or can't refinance?
- If I can't qualify for a traditional mortgage at the end of the term, will the lender renew?
In Ontario, only a Level 2 mortgage agent or a mortgage broker can arrange a mortgage with a private lender [3], so check the licence too. Add one more question of your own: is there a minimum interest period or prepayment charge if I pay it off early? That changes the 6-month column above.
Before you go private: cheaper routes to check
- A B-lender. Alternative lenders usually cost less than private lenders; see when a B-lender mortgage makes sense.
- A HELOC or refinance if your income and credit can still pass a lender's test; our home equity takeout guide compares the options.
- Waiting for renewal if the issue is a penalty; our guide to refinance costs in Canada breaks them down.
From our desk: When two private quotes land on our desk, we always lay them side by side for the exact months the client expects to need the money. More often than not, the "cheaper" rate isn't the cheaper loan once the lender fee and legal costs are in.
Private mortgage rates are the headline, but fees, interest-only payments and timing decide what you pay. Compare all-in costs for the months you'll really need the money, and agree the exit plan first.
Run the numbers: compare monthly costs with our debt consolidation calculator, or read our home equity takeout guide.
This article is for general information only and isn't financial, legal or tax advice. Rates, products and terms change without notice and are available on approved credit (OAC). The rate and terms you qualify for depend on your individual financial situation, including credit, income, property and loan-to-value. "Best rates" means the most suitable options available for your situation, not a guarantee of the lowest rate. Example rates and payments are for illustration only, as of October 2026, and are not an offer. 8Twelve Mortgage arranges mortgages through 65+ lenders and does not lend directly. Licensed across Canada — see our licences.
Example rates, fees and costs are for illustration only, as of October 28, 2026, and are not an offer. Your actual rate, fees and terms depend on the lender and your situation, OAC. 8Twelve does not fund second or private mortgages; we arrange them with third-party lenders. Private mortgages carry higher costs; lender and brokerage fees will be disclosed in writing before you commit.
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Last reviewed on October 29, 2026