Private mortgages

What to Compare Before Accepting a Private Mortgage in Ontario

Compare overall costs, payment structure, contract flexibility and a realistic exit plan—not just the interest rate. Pay particular attention to upfront fees and what happens at maturity.

Before accepting a private mortgage in Ontario, compare overall costs, how payments work, your options to change or repay the mortgage, and a realistic plan to exit it. Ontario’s Financial Services Regulatory Authority (FSRA) recommends comparing several lenders’ products and understanding the private mortgage’s costs, contract risks and exit strategy—not choosing on interest rate alone.[E1][E3][E4]
The checklist below draws on FSRA guidance, not a universal legal checklist. Features mentioned in general mortgage-shopping guidance must be checked against each private offer rather than assumed to be available.[E1]

1. Compare the full cost, including money requested before closing

FSRA recommends comparing products from several potential lenders, directly or through a licensed mortgage broker or agent who works with multiple lenders.[E1] For each offer, ask:

  • What is the overall cost, beyond the quoted interest rate? Ask for an explanation of the costs under the proposed payment schedule. FSRA highlights payment amount, frequency and amortization as factors affecting total cost.[E1][E4]
  • Are any fees requested before closing? FSRA specifically flags this question for private-mortgage borrowers.[E4] Ask what each requested fee covers and when it is payable.
  • Why are both the short- and long-term costs manageable for me? FSRA says the broker or agent should explain their reasons, along with the contract’s terms, conditions and risks.[E4]

The practical tradeoff is rate versus overall expense: a lower quoted rate is not enough to identify the better offer when other costs differ. The available evidence contains no actual offers or fee schedules, so it cannot establish which lender is cheapest.

2. Separate an affordable payment from a workable repayment structure

The term is the period covered by the particular contract; amortization is the time needed to repay the mortgage through regular payments. They are not interchangeable.[E1]

Ask for each offer’s payment amount, frequency, term and amortization, and whether payments are regular or accelerated.[E1] Also ask how much principal the proposed payments repay and what balance would remain at maturity. A manageable payment should not substitute for understanding the amount you will need to repay or refinance.

Check whether the offered rate is fixed, variable, adjustable or hybrid. If it can change, establish whether a rate change changes your payment amount or leaves it constant. These are comparison questions—not confirmation that every private lender offers each structure.[E1]

3. Price the flexibility you may actually need

Compare the contract against your likely plans:

  • Repaying early: Is the mortgage open, closed or convertible? What penalties or fees apply if you break it, and what extra or lump-sum payments are permitted?[E1]
  • Moving: Can the mortgage be transferred to another property?[E1]
  • Payment difficulties: What options, if any, exist if you cannot make a payment?[E1]
  • Renovating: Would renovations or improvements affect the private mortgage?[E4]

As a decision rule, weigh the quoted cost against restrictions that could interfere with your plans. Do not assign value to flexibility unless it is confirmed in that offer.

4. Test the exit plan—and the fallback

FSRA describes private mortgages as generally temporary and emphasizes a viable exit strategy when assessing suitability.[E3][E4] If your plan is conventional refinancing, identify the qualification requirements and the concrete changes needed, such as improved credit or increased income.[E3] An intention to refinance is not evidence that you will qualify.

Ask what happens at maturity if those changes have not occurred. In its mortgage-brokering guidance, FSRA treats renewals as new and distinct transactions, not simple extensions of existing terms; that guidance does not establish a right to renewal or future pricing.[E2]

Before accepting, request a written side-by-side comparison and an exit plan with a fallback. Pause if you cannot explain the overall cost, payment obligations, early-exit restrictions and how the maturity balance will be addressed. Without your financial details and proposed contract, affordability and exit feasibility cannot be assessed.

Sources

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