A private mortgage is a one-year loan from an investor, not a bank. It closes in days, it costs several times a bank rate once the fees are counted, and it comes due on a fixed date whether or not you have anywhere to go.
Our charges include applicable taxes. Disbursements are extra and billed at cost — itemized upfront, in writing, never hidden.
From $1,354.87 taxes included
Private lenders are individuals, mortgage investment corporations and small funds. They lend against the property rather than against the borrower, so income verification is light and approvals come quickly. Terms are usually a single year, payments are usually interest only, and the loan is expected to be refinanced or repaid at maturity rather than amortized down over time.
The advertised rate is not the cost. A lender fee and a broker fee are typically deducted from the advance, so a borrower approved for a stated amount receives noticeably less while paying interest on the full face amount. Add the lender's legal fees, the appraisal and the administration charges on top. Ask for the net advance in writing before you commit to anything.
Renewal is not a right. If the lender declines to renew at maturity, the full balance falls due on that date, and a borrower without a refinancing lined up is in default within days. Every private mortgage needs an exit identified at the outset and realistically dated — a bank refinance, a sale, or money arriving from somewhere you can actually point to.
Second mortgages sitting behind a bank first are the common shape. The first lender's consent is not usually needed, but the second lender's security is worth only what is left after the first is paid out, which is why loan-to-value limits are tight and rates are higher. A private third mortgage is rarely worth what it ends up costing.
Read the standard charge terms, not just the commitment letter. Acceleration means one missed payment can make the whole balance due. Default interest, NSF fees, renewal fees, discharge fees and administration charges are all set out in there, and they compound quickly once enforcement starts. The commitment letter is two pages; the charge terms are twenty, and the twenty are what govern.
Federal law limits some of it. The Interest Act prevents a mortgage on real property from charging a higher rate on arrears than the rate payable on principal not in arrears, which invalidates many of the default interest bumps that appear in private documents. The Criminal Code separately caps the annual percentage rate of the total cost of borrowing, lender and broker fees included — and fees are what push private loans toward that line.
Enforcement moves faster than borrowers expect. Once default is established the lender serves notice under the Mortgages Act, a redemption period runs, and the property goes on the market. There is no goodwill period and no hardship department. The cheapest moment to deal with a private mortgage default is the week it happens, not the month the notice finally arrives.
If the property is a matrimonial home, the <a href="https://www.ontario.ca/laws/statute/90f03">Family Law Act</a> requires the consent of both spouses to an encumbrance even where only one of them is on title. A charge given without that consent can be set aside. Guarantors and non-borrowing spouses should get independent legal advice, and the lender will insist on a certificate confirming they did.
Priority is everything. A search of the parcel register, of executions, and of any construction liens establishes where the new charge will actually rank, and postponements get documented rather than assumed. Property tax arrears sit ahead of the mortgage, so a tax certificate is not optional. Where the borrower is a corporation, a personal guarantee from the principals is standard.
Insurance and title cover the rest. Fire insurance naming the lender as loss payee, in an amount that reflects replacement cost, is confirmed before the advance goes out. A lender's title insurance policy is standard on private deals and covers the fraud and identity risks a search alone will not, which matters most when the borrower is under obvious financial pressure.
Where a licensed mortgage brokerage is involved, disclosure obligations attach on both sides — a cost of borrowing statement to the borrower, and a disclosure package to a private lender before funds are committed. Individual lenders who deal directly, without a brokerage, take on that diligence themselves and should not skip the steps a brokerage would have been required to take.
Interest on money borrowed to earn income from a business or property is generally deductible under the <a href="https://laws-lois.justice.gc.ca/eng/acts/I-3.3/">Income Tax Act</a>; interest on a loan against your own home to fund personal spending is not. What the funds are used for decides it, so the use should be documented at the time. We act for borrowers and for private lenders — see <a href="/real-estate">real estate</a>.
Because the lender is accepting risk a bank will not — thin income documentation, a short timeline, a second position, or a property a bank would decline outright. The rate reflects that, and the lender and broker fees deducted from the advance add materially to the true cost. Compare total cost across the term, not the posted interest rate.
Not instantly, but the path is short. Acceleration makes the whole balance due, the lender serves notice under the Mortgages Act, a redemption period runs, and after that the property can be sold under power of sale. Very little of the process is discretionary once it starts. Speak to a lawyer in the first week of default, not after the notice.
If the property is a matrimonial home, yes — the Family Law Act requires the consent of a non-owning spouse to a mortgage on it, unless that spouse has released those rights in a separation agreement, a court order authorises the transaction, or a designation of another property as the matrimonial home is registered. A charge given without the consent the Act requires can be set aside. Lenders and their lawyers insist on it for exactly that reason. A spouse who signs only as a consenting party, and not as a borrower, covenantor or guarantor, is not taking on the debt — so check which capacity the lender's document actually has them signing in.
When you sign a guarantee, or consent to a mortgage without receiving any of the money, the lender needs proof that you understood the document and were not pressured into it. A separate lawyer explains the terms, confirms you are signing freely, and certifies that. It protects you, and it protects the enforceability of the lender's security.
A current appraisal, a full title and execution search, a tax certificate, fire insurance naming you as loss payee, a lender's title insurance policy, and your own lawyer rather than the borrower's. Set the loan-to-value conservatively, take a personal guarantee where the borrower is a corporation, and diarize the maturity date the day you fund.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.