The clearest warning signs in a private mortgage are pressure to sign quickly, fees or terms that aren’t in writing, no licensed broker involved, and no clear plan for how the mortgage gets repaid or replaced. A legitimate arrangement is transparent, unhurried and fully disclosed. If something can’t be explained plainly, treat that as the red flag — not the paperwork.
The warning signs, in order of seriousness
- Pressure to sign today. Genuine deadlines exist — a power of sale, a closing date. But a lender or broker manufacturing urgency to stop you thinking, or to stop you comparing, is the most common red flag of all. A real professional wants you to understand what you’re signing.
- Fees or terms not in writing. Every fee, the rate, the term, renewal terms and prepayment terms should be set out in a written commitment before you commit to anything. “We’ll sort that out later” is not acceptable on any of them.
- No licensed broker involved. In Ontario, the broker arranging a mortgage must be licensed by FSRA. If you can’t confirm who is licensed and arranging your mortgage, stop.
- No clear exit. A private mortgage is a short-term tool. If nobody can tell you how it gets repaid or replaced — and by when — that’s a serious gap, not a detail.
- Being discouraged from getting your own lawyer. You should have independent legal advice on the commitment. Anyone steering you away from that is protecting themselves, not you.
- The numbers don’t add up to something you can afford. A mortgage you can’t service just moves the problem a few months down the road, with fees attached.
- Vague or evasive answers. “Don’t worry about that” is not an answer. On this much money, every question deserves a clear one.
Softer signs worth noticing
- Fees that seem high relative to the amount you’re borrowing, with no explanation of why
- An interest reserve that quietly reduces the money that reaches you, mentioned only in passing
- A rate quoted without any of the conditions that would change it
- Reluctance to put you in touch with the actual lender or to name the lending source
- Reviews or testimonials that feel generic or unverifiable
What a good arrangement looks like instead
Unhurried. Everything in writing. A licensed broker you can verify. A clear, dated exit. Payments you can genuinely afford. Your own lawyer reviewing the commitment. And a straight answer to every question — including “is there a situation where you’d tell me not to do this?”
The single most reassuring sign is a broker willing to talk you out of a deal that isn’t right for you. Anyone who only ever says yes is selling, not advising.
If you’re already partway in
If you’ve started a process that’s showing these signs, you are usually not obligated until you’ve signed a commitment — and even then, independent legal advice before closing is your protection. It is entirely reasonable to pause, ask for everything in writing, and get a second opinion. A legitimate arrangement survives scrutiny. One that doesn’t, wasn’t right anyway.
Frequently asked questions
Is it normal for a private mortgage to have high fees?
Private mortgages carry higher fees than bank lending — that’s expected. What matters is that every fee is disclosed in writing, explained, and reasonable for the amount and the work involved. Undisclosed or unexplained fees are the problem, not fees themselves.
How do I know if the lender is legitimate?
Confirm the broker’s licence on the FSRA register, insist on written disclosure of all terms, and have your own lawyer review the commitment before closing. See how to verify a mortgage lender in Ontario.
Can I back out if something feels wrong?
Until you’ve signed a binding commitment, you’re generally free to walk away. This is exactly why independent legal advice before signing matters — it’s your chance to have someone on your side check the terms.
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This page is general education about mortgage options in Ontario. It is not legal, accounting, tax or insolvency advice, and it is not an offer of credit. Please seek independent professional advice for your own situation.