Most people size up a private mortgage by the interest rate. The rate matters — but it’s not the full cost. The number that actually decides whether a private mortgage solves your problem is your net proceeds: the usable cash left after fees, legal, appraisal and payouts. Here’s the full cost stack, in plain terms, and the three tests I run on every file.
- A private mortgage isn’t one cost — it’s a stack (rate, lender fee, legal, appraisal, title, payouts).
- What matters is net proceeds (usable cash), not the headline approval amount.
- Judge it on the cost to carry and the cost to exit — not just the cost to close.
The private mortgage cost stack
Some of these are paid before closing, some are deducted from proceeds, some are monthly, and some only appear if you can’t exit on time:
- Appraisal / valuation — often around $500, depending on the property.
- Lender fee — commonly an indicative 2–3%, set by risk, position, LTV, property and urgency.
- Brokerage fee — if applicable, always disclosed.
- Interest rate — priced by position, LTV, location, property type and exit.
- Title insurance — often around $400.
- Legal costs — usually the lender’s lawyer and your own (indicative $1,500–$3,500 + about $1,000).
- Registration, discharge, payout, title-search and admin costs where applicable.
- Renewal or extension fees — only if you can’t pay out at maturity.
These are planning estimates — your actual numbers come from the lender’s commitment and legal documents, all disclosed in writing. See how it maps on rates, fees & costs.
The hidden mistake: confusing approval with usable money
The headline mortgage amount is not the cash you can use. If you say you need $100,000, that usually means $100,000 in hand after all costs, arrears and payouts. Once fees and deductions come off, a mortgage that “sounds big enough” can leave you short — the net proceeds problem.
Why the appraisal matters more than $500
An appraisal isn’t just a box to tick. If the value comes in lower than expected, your loan-to-value rises — which can shrink the approved amount, raise the lender fee, increase the rate, or make the file unsuitable. That $500 can swing thousands in pricing, especially on rural, unique, mixed-use, commercial or partially renovated properties. Lenders care about supportable market value, not listing prices or renovation cost.
Legal costs — why you often pay both sides
On many private files, you’re responsible for your own legal costs and the lender’s. That surprises borrowers used to simple bank deals. The lender’s lawyer protects their security, reviews title and coordinates closing; your own lawyer makes sure you understand the commitment, terms, maturity date and default consequences before you sign. It’s not just an expense — it’s borrower protection, and complex files (arrears, power of sale, corporate ownership, title issues) cost more.
The two tests after closing: carry and exit
The carry test: many private mortgages are interest-only, which keeps the monthly payment lower — but the principal doesn’t shrink, so review the payment alongside taxes, insurance, your first mortgage (if it’s a second), and everyday costs. A mortgage with plenty of equity can still fail if you can’t carry the payment.
The exit test: a term is a deadline. If you can’t repay, refinance, sell or renew by then, renewal fees, updated legal and appraisal costs, a higher rate or stricter conditions can appear. This is the renewal trap — reaching maturity in the same position, with less negotiating power. That’s why every private mortgage needs a dated exit plan from day one.
How loan-to-value changes the cost
LTV is one of the biggest cost drivers. The higher your LTV, the less protective equity remains for the lender — which can mean fewer lenders, higher rates and fees, or a smaller approval. The last dollars borrowed are often the most expensive, so sometimes asking for less improves your pricing and still solves the problem. A good review challenges the requested amount — not to limit you, but to find the lowest-risk amount that actually works. And remember a second mortgage prices higher than a first because it sits behind it, so the right comparison is total cost, not rate versus rate.
Private mortgage cost FAQ
What costs are involved in a private mortgage in Ontario?
Interest, lender fee, brokerage fee (if applicable), appraisal, title insurance, your legal fees and the lender’s, plus registration/discharge and possible renewal fees. The exact mix depends on the lender, property, LTV, position, risk, term and exit.
How much is a private mortgage lender fee?
Commonly an indicative 2–3% of the mortgage amount, but it varies with risk, LTV, property type, urgency and position. Review the actual figure in the commitment and disclosure documents.
Who pays the legal fees on a private mortgage?
The borrower usually pays their own legal costs and the lender’s. Complex files cost more, so confirm the estimates before proceeding.
Is the interest rate the biggest cost?
Not always. Review the total cost of borrowing — fees, legal, appraisal, title, renewal risk and exit timing can change the true cost more than a small rate difference.
Can private mortgage costs be added to the mortgage?
Sometimes certain costs are paid from proceeds, depending on lender approval and available equity — but that reduces your net proceeds, so review the usable cash carefully.
Why can two offers with the same rate cost different amounts?
Because fees, legal costs, appraisal requirements, renewal terms, prepayment rights and net proceeds differ. Always compare the full structure, not just the headline rate — see compare your options.
Written and reviewed by Rajiv Verma, Mortgage Broker · Mortgage Architects, FSRA Brokerage Licence #12728. General information about mortgage options in Ontario — not legal, tax or insolvency advice, and not an offer of credit. All fee and cost figures are indicative planning estimates; your actual costs come from the lender commitment and legal documents.
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