Private Mortgage Cost Canada: Rates, Fees & Risks 2026

Why private mortgages are back in the conversation

Private lending has quietly become a bigger part of the Canadian mortgage market. Higher qualifying rates, tighter bank underwriting, and a wave of renewals in 2025 and 2026 have pushed more borrowers toward alternative options. Private lenders can typically approve files in days rather than weeks, which is genuinely useful when a closing date is looming or a bank has said no at the last minute.

The trade-off is cost. Interest rates and fees are meaningfully higher than what an A-lender or B-lender would charge, and terms are short. If you are considering this path, the honest question is not can I get approved — it is can I afford the full cost, and do I have a realistic exit plan? For a plain-English primer on how the product works, our private mortgage lending in Canada guide is a good starting point.

Quick start: pick your path

Most Canadians looking at private financing fall into one of three groups. Identifying yours helps you focus on the right next step rather than wading through generic advice.

What a private mortgage actually costs in Canada

Six cost components typically make up the full price of a private mortgage. Each one is small on its own; together they add up quickly.

• Interest rate. Usually 8% to 15% annually, depending on loan-to-value (LTV, the loan size divided by the home’s value), property type, and borrower profile. Rates are typically interest-only.
• Lender fee. A one-time fee of 1% to 4% of the loan amount, taken from the mortgage advance at closing.
• Broker fee. A one-time fee of 1% to 2% paid to the mortgage brokerage, disclosed in writing before you sign.
• Legal fees. Typically $1,500 to $2,500 for lender and borrower counsel combined.
• Appraisal. Usually $400 to $800 for a residential property, paid up front.
• Administration. Small file, discharge, and setup fees that typically total $300 to $700.

For a full glossary of these terms, see our mortgage glossary.

Worked example: a $400,000 private first mortgage

Numbers help. Consider a homeowner who needs $400,000 for a twelve-month term at a 10% interest rate, with a 2% lender fee and a 1% broker fee. Here is how the cost breaks down in real dollars.

Interest at 10% on $400,000 over twelve months adds up to $40,000. The lender fee is $8,000. The broker fee is $4,000. Legal costs come to roughly $2,000, an appraisal to $600, and administration fees to about $500. All in, the borrower pays close to $55,100 over the year.

You can model different loan sizes and rates with our mortgage payment calculator to see how the cost changes with your specific numbers.

Private vs bank vs B-lender: all-in APR compared

Comparing a private mortgage rate to a bank rate is misleading because the fee structures are completely different. A fair comparison uses all-in APR — the annualized cost including every fee spread across the term.

For the same borrower, an A-lender (a chartered bank or major lender that meets OSFI B-20 rules) may offer roughly 5.5% APR all-in. A B-lender (a trust company or alternative bank that accepts slightly weaker files) typically lands around 7.5% APR. A private lender for the same file may sit near 13.5% APR once one-time fees are annualized over a twelve-month term.

The gap between B-lender and private is often the deciding factor. If you can qualify for a B-lender, doing so usually saves several thousand dollars per year. Current benchmark ranges are on our rate details page.

The five real risks of a private mortgage

Cost is only part of the picture. Five specific risks deserve equal attention before signing, and each has a plain mitigation.

1. 1
   Rate riskPrivate rates can move quickly between quote and funding. Mitigation: ask your broker for a written rate commitment with a clear expiry date, and lock legal work on both sides before that date.
2. 2
   Fee riskSome private deals stack lender fees, broker fees, and hidden setup charges. Mitigation: request a full written cost disclosure — Ontario borrowers should receive a FSRA-prescribed disclosure form — and add every line to your all-in APR calculation.
3. 3
   Short-term renewal riskA six or twelve-month term means renewal comes fast. If you cannot qualify for a new mortgage in time, you face another private renewal at whatever the market offers. Mitigation: start your exit plan the day you fund.
4. 4
   Default and power-of-sale riskIn Ontario a lender can pursue power of sale quickly; in BC and Alberta the process is typically foreclosure. Timelines are much shorter than most borrowers assume. Mitigation: build a three-month payment reserve into your budget before signing.
5. 5
   Exit-failure riskThe biggest risk is being unable to leave the private market at the end of your term. Mitigation: work with a broker who commits to an exit plan in writing at the outset.

If credit is the reason a bank has said no, our bad credit mortgage solutions page walks through repair-focused alternatives that may cost less than private.

Your 12-month exit-strategy roadmap

A private mortgage should be a bridge, not a destination. The realistic exit target for most files is twelve months back to an A-lender or a strong B-lender at meaningfully lower cost. Here is how a broker-led plan typically unfolds.

• Months 1 to 3 — credit rehab. Pull your credit report from both Equifax and TransUnion. Bring every open account current, pay down revolving balances below 30% of their limits, and dispute any errors.
• Months 4 to 6 — income documentation. Gather two years of Notices of Assessment, T4s or T1 Generals, and current pay stubs. Self-employed borrowers should organize business financials and any GST filings.
• Months 7 to 9 — debt clean-up. Close unused credit lines, consolidate small debts, and avoid new applications that could ding your score.
• Months 10 to 12 — A-lender re-application. Start the application eight to ten weeks before your private mortgage matures. You will be qualified against the greater of contract rate plus 2% or 5.25% — the OSFI B-20 stress test.

Working with an independent broker throughout this window matters. As Razi Khan, Founder and Mortgage Broker at Pegasus often notes, the exit plan should be as detailed as the private mortgage itself. Our why work with a broker page explains the broader value.

Common mistakes borrowers make

• Comparing headline rates instead of all-in APR. A 9% quote with a 4% lender fee often costs more than a 12% quote with a 1% fee.
• Skipping the written disclosure. Verbal fee estimates change. Written disclosure is your protection.
• Assuming CMHC insurance applies. Private mortgages are not insured by CMHC, Sagen, and Canada Guaranty. Your down payment risk is different.
• Ignoring the renewal date. The end of a private term arrives faster than most borrowers plan for.
• Choosing the fastest approval over the best fit. A B-lender approval that takes an extra week may save thousands.
• Not building a payment reserve. Three months of payments in a separate account keeps a bad month from turning into default.
• Working with a broker who will not put the exit plan in writing. See our FAQ page for more on this.

Frequently asked questions

About the author

Razi Khan

Founder, CEO & Licensed Mortgage Broker · Pegasus Mortgage Lending · Toronto, Ontario · FSRA Lic #11479

Razi Khan is the Founder, CEO, and a licensed Mortgage Broker at Pegasus Mortgage Lending Center Inc., based in Toronto. With over 20 years of experience in the Canadian mortgage industry, Razi has personally guided more than 3,000 clients through some of the most complex and high-stakes financial decisions of their lives — from first-time purchases in the GTA to refinancing strategies, alternative lending solutions, and cross-border mortgages for Canadians buying in the United States.

Razi founded Pegasus in October 2008, launching the brokerage at the height of a global financial crisis. He works across the full spectrum of borrower profiles, with particular expertise in complex files including self-employed borrowers, credit-challenged clients, and investors building multi-property portfolios.

Learn more about Razi Khan →

Sources & references

1. Office of the Superintendent of Financial Institutions (OSFI) — B-20 Residential Mortgage Underwriting Practices — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures
2. Financial Services Regulatory Authority of Ontario (FSRA) — Mortgage Brokerage Regulation — https://www.fsrao.ca/industry/mortgage-brokering-sector
3. Canada Mortgage and Housing Corporation (CMHC) — Mortgage Loan Insurance — https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance
4. Sagen — Mortgage Insurance Overview — https://www.sagen.ca/
5. Canada Guaranty — Mortgage Default Insurance — https://www.canadaguaranty.ca/
6. Financial Consumer Agency of Canada — Mortgages — https://www.canada.ca/en/financial-consumer-agency/services/mortgages.html
7. Government of Ontario — Consumer Protection Ontario — https://www.ontario.ca/page/consumer-protection-ontario
8. Revenu Québec — Property Transfer Duties — https://www.revenuquebec.ca/en/citizens/your-situation/new-owners/