When homeowners consider a private mortgage, interest rates often get the most attention. However, fees can make up a significant portion of the total borrowing cost.
Understanding private mortgage fees upfront helps homeowners compare options properly and avoid surprises at funding or renewal.
This guide breaks down the most common fees associated with private mortgages in Canada and explains how they impact overall cost.
Overview of Common Private Mortgage Fees
Private mortgage fees typically fall into four main categories:
- Lender fees
- Broker fees
- Legal fees
- Appraisal and administrative costs
Not every loan includes all fees, but most private mortgages involve several of these costs.
Lender Fees Explained
Lender fees are charged directly by the private lender for providing the loan.
These fees compensate the lender for:
- Short-term use of capital
- Increased risk
- Flexible underwriting
Typical Lender Fee Range
In Canada, lender fees often range from:
- 1% to 4% of the loan amount
For example:
- $250,000 loan at 2% lender fee = $5,000
- $400,000 loan at 3% lender fee = $12,000
Lender fees are usually paid upfront and may be deducted from loan proceeds.
Broker Fees Explained
Many private mortgages are arranged through mortgage brokers.
Broker fees compensate brokers for:
- Assessing borrower needs
- Sourcing suitable lenders
- Structuring the loan
- Coordinating approvals and funding
Typical Broker Fee Range
Broker fees commonly range from:
- 1% to 3% of the loan amount
For example:
- $300,000 loan at 2% broker fee = $6,000
Broker fees may be paid directly by the borrower or included in the loan amount, depending on the structure.
Legal Fees and Disbursements
Private mortgages must be registered on title, which requires legal services.
Legal fees typically cover:
- Reviewing mortgage documents
- Registering the mortgage
- Handling lender instructions
- Managing fund disbursement
Typical Legal Cost Range
Legal costs often range from:
- $1,500 to $3,000
More complex transactions may increase legal fees.
Appraisal Fees
Most private lenders require an independent appraisal to confirm property value.
Appraisals help lenders:
- Assess loan-to-value
- Confirm property condition
- Reduce valuation risk
Typical Appraisal Cost
Appraisal fees usually range from:
- $400 to $700
Special property types or rural locations may cost more.
Additional Administrative or Miscellaneous Fees
Some private mortgages may include additional costs, such as:
- Document preparation fees
- Renewal fees
- Discharge fees
- Extension fees
These costs vary by lender and should always be reviewed in advance.
Example: Total Fees on a Private Mortgage
Scenario:
- Loan amount: $350,000
Estimated fees:
- Lender fee (2%): $7,000
- Broker fee (2%): $7,000
- Legal fees: $2,000
- Appraisal fee: $600
Estimated total fees: $16,600
This example shows how fees can add up even before interest is considered.
How Fees Affect Your Net Loan Proceeds
Fees are often deducted from the loan amount at funding.
For example:
- Approved loan: $350,000
- Total fees: $16,600
Net funds received: ~$333,400
Understanding net proceeds is important when planning how funds will be used.
Fees at Renewal or Extension
If a private mortgage is renewed or extended, additional fees may apply.
These may include:
- Renewal lender fees
- Updated appraisal fees
- Legal costs
Repeated renewals can significantly increase total borrowing cost.
How to Evaluate Whether Fees Are Reasonable
To assess fee reasonableness, homeowners should:
- Compare multiple offers
- Ask for a full fee breakdown
- Understand which fees are negotiable
- Confirm if fees apply again at renewal
Transparency is key when evaluating private mortgage offers.
Questions Homeowners Should Ask About Fees
Before accepting a private mortgage, ask:
- What fees are charged upfront?
- Are any fees deducted from the loan amount?
- What fees apply at renewal or extension?
- Are broker fees separate from lender fees?
Clear answers help avoid cost surprises.
Important Fee Disclaimer
Private mortgage fees vary by lender, broker, property, and risk level.Examples provided are for illustration only and may differ based on individual circumstances.
Final Thoughts
Private mortgage fees are a major part of total borrowing cost. Understanding how lender fees, broker fees, and legal costs work allows homeowners to make informed decisions.
Clear fee transparency helps ensure private mortgages are used responsibly and effectively.
Note: Rates and costs vary based on your credit profile, available equity, and location.