Mortgage Broker vs. Private Lender in Ontario: The Legal Differences

If you can't qualify for financing through a bank, someone in your circle — a realtor, a mortgage professional, a friend of a friend — will often mention "private lending" as an option. Along the way, you'll hear the terms mortgage broker and private lender used almost interchangeably. They aren't the same thing, and the difference matters more than it looks.

A broker and a private lender occupy different legal positions relative to you. One is a regulated intermediary with duties toward you as a client. The other may simply be the source of the money, with a much more limited legal relationship — a straightforward debtor-creditor relationship secured by a mortgage on your property.

Understanding which one you're dealing with, and what that means for the protections you do (or don't) have, is worth sorting out before you sign anything.

Who's Who

A mortgage broker (or mortgage agent) is an individual licensed to arrange mortgage financing on behalf of borrowers, working with one or more lenders to find and present financing options. The broker typically doesn't lend their own money — they're the intermediary who assembles your application, shops it to lenders, and presents you with options.

A private lender is simply a source of mortgage funds outside the traditional bank/credit union channel — this could be an individual, a group of individual investors, or a company whose business is lending against real estate. A private lender may work through a broker to find borrowers, or deal with you directly.

The confusion arises because the same person or company can sometimes wear both hats in different transactions, and because private lending deals are very often arranged by a broker even though the broker isn't the one advancing the funds.

How Each Is Regulated

Mortgage brokers and agents in Ontario are licensed and regulated by the Financial Services Regulatory Authority of Ontario (FSRA) under the Mortgage Brokerages, Lenders and Administrators Act, 2006. That licensing regime governs who can call themselves a broker or agent, what standards they must meet, and what conduct obligations they owe.

A private lender who is simply advancing their own money — and not also acting as a licensed broker or administrator for others — generally sits outside that broker-specific licensing framework for that role. That doesn't mean private lending is unregulated in every respect (mortgage lending still engages general contract law and consumer protection principles), but it does mean the specific broker conduct rules don't automatically apply to someone who is only lending, not arranging.

What Duties Each Owes You

This is the practical heart of the distinction:

• A licensed broker generally owes you certain regulatory obligations around suitability and disclosure when arranging a mortgage on your behalf — steering you toward financing that's appropriate for your circumstances and being transparent about material terms, including how the broker is compensated.
• A private lender, dealing with you directly and not acting as your broker, is on the other side of the transaction from you — their legal interest is in getting repaid on the terms of the loan, not in advising you on what's suitable. There's no equivalent broker-style duty running from a private lender to a borrower simply because money changes hands.

That asymmetry is exactly why it's worth having your own lawyer review a private mortgage before you sign — nobody at the table is working solely in your interest unless you've retained them to do so.

The Mortgage Document Itself

Whether you borrow from a bank, through a broker-arranged lender, or from a private individual, the legal mechanics of the security are similar: the loan is secured by a mortgage (or charge) registered against your property on title, typically through Ontario's electronic land registration system. What tends to differ with private lending is the commercial terms — rate, fees, term length, and the lender's remedies on default are often negotiated on a one-off basis rather than following a standardized bank template, which is exactly why careful review of the document matters more, not less.

When People Use a Private Lender

Private lending typically comes up when a borrower doesn't fit conventional bank lending criteria — self-employed income that's hard to document conventionally, a bruised credit history, a short-term bridge need before a sale closes, or a property type banks are reluctant to finance. It can be a legitimate and useful tool. It also tends to come with materially different terms than bank financing, so understanding exactly what you're agreeing to is essential.

Frequently asked questions