Private lenders share one idea, lending on equity, but differ on fees, who pays for the appraisal, terms and speed. Get the total cost in writing, ask who pays for the appraisal, know what happens at maturity, and check the lender's licence.
Ask five people what a private lender is and you may get five answers. In Ontario the term covers individual investors, groups of investors lending together, and mortgage investment corporations (MICs), which are companies that pool investors' money to lend against property. They all share one idea: the property and the equity in it matter more than your income or your credit score. Beyond that, they can work very differently, and the differences decide what you pay, how fast you close and how smoothly the exit goes. This guide covers what private lenders have in common, where they differ, and the questions worth asking before you commit. For the basics of how a private mortgage works, see our private mortgages in Ontario page.
Across the lender programs we work with, a few things show up again and again. Approval rests mainly on the property: its value, the equity you hold and how easily it could be sold. Terms are short, often anywhere from a few months up to about two years, and some programs run longer. Interest-only payments are common, which keeps the monthly cost low but means the principal is still owed at the end of the term. And the cost is higher than a bank mortgage, which is why a private mortgage is usually planned as a bridge to cheaper financing. Our published starting point is rates from 4.95% on interest-only private mortgages, and your actual rate and fees depend on the file.
The headline rate is only part of the picture. These are the areas where lenders vary most, and where a conversation with an experienced agent can save you real money. Everything below is a general pattern, not a quote: terms vary by lender and change without notice.
Appraisal costs. Most lenders want an appraisal, usually from an approved list of appraisers. Who orders it and who pays for it varies. Some lenders require you to order and pay for it yourself, some order it and cover the cost when one is needed, and a few small-loan programs rely on automated valuations and skip a full appraisal. Because an appraisal can cost a meaningful amount, it is one of the first things worth asking about. We cover it in detail in who pays for the appraisal on a private mortgage.
The fee stack. A private mortgage usually carries more than an interest rate. There is typically a lender fee, often in the range of about 1% to 3% of the loan on larger loans, and many lenders set a minimum dollar fee. Small loans and very fast, automated products can cost considerably more as a share of the loan. A broker fee may apply, depending on the file, and legal costs and the appraisal are usually separate. In Ontario, on a loan above $75,000 the borrower and the lender each need their own lawyer, so there can be two sets of legal fees, as set out in the Law Society's rules. Always ask for the full list in writing. We explain how costs can come out of your funds or be added to the balance in why you may receive less than you borrow.
What they look at. Some lenders set no minimum credit score. Others set a floor. All of them care about the property: its location, type and condition, and how marketable it is. "Bad credit friendly" rarely means "no questions asked". It means the equity and the exit plan carry the file. We go through this in bad credit and private mortgages in Ontario. We go through this in detail in bad credit and private mortgages in Ontario.
Term, payments and renewal. Terms commonly run from a few months to a couple of years. Many mortgages are open or allow early repayment, and others charge a penalty such as a number of months' interest. Renewal is often possible, usually for a fee. The question that matters most is what happens at maturity and how you plan to repay. We cover it in what happens at the end of a private mortgage term.
First or second position. Some lenders do mostly first mortgages, others second mortgages, and many do both. A second mortgage generally costs more than a first because it is riskier for the lender. The Financial Consumer Agency of Canada notes that interest rates on second mortgages are usually higher than on first mortgages. For the details, see how a second mortgage actually works.
Speed. Many private lenders advertise decisions within a day or two. What actually sets your closing date is how quickly the appraisal is done, the title work is cleared and the documents come in. A lender that is quick on paper can still be slow if the file is incomplete.
1. What is the total cost, in writing? Lender fee, broker fee, legal costs, appraisal and any administration fee, before you commit.
2. Is an appraisal needed, who orders it and who pays? This one question can change the cost of the deal.
3. Is the mortgage open or closed? If you repay early, is there a penalty?
4. What is the term, and what happens at maturity? Is there a renewal option, and what does it cost?
5. Is the payment interest-only or amortized? What will you actually pay each month?
6. Is this a first or second mortgage? What does it do to your existing mortgage, if you have one?
7. What documents do you need, and how long does each step take? Speed depends on the file as much as the lender.
8. What is the lender's licence number? Check it, as explained below.
9. What happens if a payment is missed? Ask about default charges and the process before you sign.
10. Do I need my own lawyer, and who pays for the legal work? Above $75,000 the borrower and the lender each need their own lawyer, so ask who pays for both.
Yes, in most cases. Under Ontario's Mortgage Brokerages, Lenders and Administrators Act, 2006, a person or entity that lends money in Ontario on the security of real property is a mortgage lender, and no one may carry on business as a mortgage lender unless they hold a brokerage licence or are exempt from the requirement. Financial institutions such as banks are among the exempt. So when you deal with a private lender, ask for the licence number and check it on the public licence register kept by Ontario's financial services regulator, FSRA. Brokerages and administrators show their licence numbers on their materials, and a lender who will not give one is a warning sign.
A private mortgage is not the right answer for everyone. If a bank or B-Lender will approve you at a lower cost, that is usually the better route, and it is worth checking before you assume otherwise: start with private lender vs. B-Lender vs. bank. If you are renewing, see switching lenders at renewal. If you have already been turned down, read what a bank decline actually means. And if you can access equity another way, compare the options in second mortgage vs. HELOC vs. refinance. Because private money costs more and terms are short, it works best with a clear plan for moving to cheaper financing.
iDream Financial is a group of Ontario Mortgage Agents working with Mortgage Alliance (FSRA License #10530). We do not lend our own money. We place files across a network of 300+ lenders, which means the question we help answer is which lender's terms suit your file, not just who offers the lowest headline rate. If you would like to compare options, send us your situation or see our private rates and fees guide.
This article is general information as of October 2026, not legal, tax or mortgage advice. Lender terms vary and change without notice.
Private Lender vs. B-Lender vs. Bank Mortgage: What's Actually the Difference?
Second Mortgage vs. HELOC vs. Refinance: Which One Fits Your Situation?
Who Pays for the Appraisal on a Private Mortgage in Ontario?
Borrowing $100,000 on a Private Mortgage: What You Actually Receive and Owe
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