Private Mortgage Rates and Fees in Ontario: How to Calculate the All-In Cost

Private mortgage pricing is often discussed as if the only question were “what rate?” That is the wrong unit of comparison. Private mortgages are commonly short-term, fee-bearing transactions, so the economically relevant number is the total dollars spent to buy a specific amount of time. A borrower should be able to answer three questions before signing: how much cash do I actually receive, how much will this financing cost during the expected holding period, and what balance must be repaid at exit?

The note rate is only the first layer

Interest is calculated on the mortgage principal under the commitment and registered documents. Many private mortgages use interest-only payments, which keep the scheduled payment lower than an amortizing loan but generally leave principal outstanding at maturity. A borrower comparing a private mortgage to a bank mortgage should therefore compare both cash flow and principal reduction.

Lender fees are economically part of the price of capital

A lender fee may compensate the lender for underwriting, risk, capital allocation and transaction economics. For a short term, the fee can have a large annualized effect. The borrower should not mentally separate “rate” from “fee” merely because one appears on the monthly payment and the other appears at closing.

Brokerage fees, legal costs and appraisal are separate transaction costs

Where a brokerage fee applies, it should be disclosed and understood. Private transactions can also require appraisal and independent legal advice, and the borrower may be responsible for certain lender legal costs depending on the commitment. The exact cost stack varies, so use the disclosure for the actual transaction rather than a generic estimate.

A simple all-in-cost model makes offers comparable

Convert every item to dollars. Then compare the net advance—the money left after required payouts and fees—with the amount that must be repaid. This is much more informative than comparing 8.99% and 9.49% in isolation.

Example: a lower rate can still be the more expensive mortgage

Imagine two one-year offers for the same principal. Offer A has a lower rate but a materially higher lender fee and expensive renewal terms. Offer B has a slightly higher rate, lower upfront cost and an open exit after six months. If the borrower expects to refinance in eight months, Offer B may have lower expected dollars. The example is why product design matters more than a rate leaderboard.

Interest reserves change cash flow, not economic cost

A distressed borrower may use a structure where several months of interest are held back from mortgage proceeds. This can prevent a new monthly payment from overwhelming an already stressed budget and can be useful during a planned sale or stabilization period. But the reserve is funded from the borrower’s equity. Always show the borrower both the “payment-free” experience and the maturity balance.

Renewal risk is part of today’s price

A one-year private mortgage is not truly a one-year decision if the borrower has no credible exit by month twelve. Repeated renewals can add new fees and prolong high interest, which is why FSRA has warned about equity erosion when borrowers remain in private financing. The expected cost model should include a realistic probability of extension rather than assuming a perfect exit.

Fees should be judged against the counterfactual

A $12,000 financing cost can be expensive and still be rational if the alternative is a much larger forced-sale loss, a failed purchase closing or high-cost unsecured debt that the mortgage safely restructures. Conversely, even a “cheap” private mortgage can be poor value if an institutional lender could have solved the same problem with adequate time. Cost has to be compared with the best feasible alternative.

Ask for the maturity worksheet before signing

The best private-mortgage pricing discussion is transparent enough that the borrower could explain it to someone else. Rate, fees and legal cost are not hidden technicalities; they are the price of using scarce, flexible secured capital. Once they are converted to dollars and tied to a dated exit, the borrower can judge whether that price is worth paying.

Separate “cost to obtain” from “cost to carry”

Private financing has two distinct cost buckets. Cost to obtain includes lender fee, brokerage fee where applicable, appraisal, legal and registration/discharge expenses. Cost to carry includes interest and any ongoing administration or required payments. This separation helps borrowers compare a short high-fee loan with a longer lower-fee alternative and prevents a low note rate from obscuring expensive acquisition costs.

Calculate cost per month of useful bridge time

If a private mortgage costs $24,000 all-in and is repaid after eight months, the borrower effectively paid $3,000 per month for the flexibility it created. That figure can then be compared with the value preserved: avoiding forced-sale discount, completing a renovation, keeping a business asset, or reaching an institutional refinance. It is a much more intuitive decision metric than the nominal rate alone.