Private mortgage costs either come out of your funds, so you receive less than you borrow, or are added to the balance, so you receive the full amount and owe more. A small number of lenders cover all upfront costs, but it is a trade and not a discount, so compare the total cost.
Most borrowers focus on the interest rate and the amount they need. The question that catches people out is how much they will actually receive. On many private mortgages the costs come out of the funds, so a borrower who needs $100,000 can end up with noticeably less in the bank and still owe the full $100,000. This guide explains why that happens, the two ways costs are handled, and the small group of lenders that cover the costs upfront so you receive the full amount. It is part of our wider guide to how private lenders differ and what to ask.
A private mortgage can carry several charges on top of the interest: a lender fee, a broker fee, the appraisal, administration charges, and legal fees for the lawyers who close the deal, which on larger loans means two lawyers. Not every mortgage has all of them, and the amounts vary by lender, loan size and program. The point is that these costs exist, and someone pays them. We cover the appraisal in who pays for the appraisal on a private mortgage, and the wider cost picture in our private rates and fees guide.
Legal fees deserve a closer look, because the rules decide how many lawyers are involved. In Ontario, the Law Society's Rules of Professional Conduct say a lawyer must not act for both the lender and the borrower in a mortgage or loan, with a few exceptions. One exception applies when the loan does not exceed $75,000, and another applies when the lender is a bank or similar institution. So on a private mortgage above $75,000, the borrower and the lender each need their own lawyer, and in most private deals the borrower ends up paying for both. At or below $75,000, one lawyer may act for both sides if the joint-retainer rules are followed. You can read the rule, 3.4-12 and the exceptions that follow, in the Law Society's Rules of Professional Conduct. This is general information, so confirm how it applies to your file with a lawyer.
1. Costs come out of your funds (a net advance). The fees are deducted when the mortgage funds, so you receive less than you borrowed. You still owe the full mortgage amount, and interest is charged on it.
2. Costs are added to the mortgage (a full advance). The lender pays the costs upfront and adds them to the balance you owe. You receive the full amount you asked for, and you owe more at the end of the term. Interest is charged on the larger balance.
For illustration only, not a quote. Here is the same $100,000, 12-month, interest-only private mortgage funded two ways by programs that add their costs to the balance, which are the lender fee, broker fee, administration and legal fees combined. Figures are rounded, and actual costs depend on the lender, the program and your file.
| Same $100,000, 12 months, interest-only | Program A higher fee, lower rate | Program B lower fee, higher rate |
|---|---|---|
| You receive | $100,000 | $100,000 |
| Costs added to the mortgage | $15,400 | $6,700 |
| Interest payments over the year | $5,750 | $13,800 |
| Balance owed at the end of the term | $115,400 | $106,700 |
Figures are rounded. Actual costs vary by lender, program and file.
Had the same costs been taken out of your funds instead, you would receive less than $100,000, but you would owe only $100,000 at the end. That is the difference between a net advance and a full advance.
Look at where the cost sits. Both programs give you the full $100,000, but Program A puts most of the cost in the balance you owe at the end, and Program B puts more of it in the payments you make along the way. Add the interest payments to the costs added to the mortgage, and the two come out close to each other over the year. A low fee is not a low cost, and a full advance is not a discount. It is a way of getting the whole amount on day one, and you pay for that convenience, which is why we suggest comparing the total cost of borrowing, not just the fee or the rate.
A small number of private lenders work the second way, and they cover a lot. In these programs the lender typically covers the lender fee, the broker fee, the appraisal when one is needed, administration and the legal fees, including the fees of both lawyers on larger loans, and recovers them through the balance owed. Some also close with virtual signing, and some review deals within a day or two. Some offer a payment-free or reduced-payment option during the term, which helps cash flow but means the balance grows. We are describing a type of program here. We are not recommending a particular lender, and the terms, the lenders and the conditions all vary and change.
These programs tend to work best on smaller loans, up to about $100,000. As the loan gets larger, the costs as a share of the mortgage can climb, and the structure becomes expensive. A borrower who needs more than that usually has better options elsewhere, and should compare before choosing.
It can make sense when you need every dollar on day one, for example to pay out a debt, close a purchase on a tight deadline, or cover a short-term gap, and you have a clear plan to repay or refinance. It can also make sense when keeping monthly cash flow free matters more than the extra balance, as long as you understand how much the balance will grow.
If you can pay the costs out of pocket and want to owe less, a net advance, or a lower-cost program, is likely cheaper. If you need a larger loan, if you plan to hold the mortgage for a long time, or if you have other lower-cost options such as a bank, a B-Lender or a home equity product, compare them first. Our guides on private lender vs. B-Lender vs. bank and second mortgage vs. HELOC vs. refinance are a good place to start.
In Ontario, a mortgage brokerage must disclose the cost of borrowing to each borrower under the Mortgage Brokerages, Lenders and Administrators Act, 2006, and for term mortgages it must also tell you whether you can repay early and on what terms. In practice that is the Mortgage Loan Disclosure Statement, which the borrower is asked to sign before the file moves ahead. Read it. It shows what you will receive, what you will owe and what the costs are, in one place, before you commit.
Ask what the total costs are and who pays them. Ask how much you will receive and how much you will owe at the end of the term. Ask how interest is calculated on any costs added to the mortgage, and whether those added costs count toward the lender's loan-to-value limit. Ask what happens to the balance if payments are small or deferred, and whether you can repay early. Ask whether the legal fees for both lawyers are included, and whether you should take independent legal advice, even where a program does not require you to hire your own lawyer.
A private mortgage is not only a rate. Costs can come out of your funds or be added to your balance, and a small number of lenders will cover all of them so you receive the full amount. That can be exactly what a borrower needs, but it is a trade, not a discount. If you would like to see which programs might fit your property, your loan size and your timeline, contact us and we will walk through the options. This article is general information as of October 2026, not legal, tax or mortgage advice, and lender terms vary and change without notice.
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