If you’re exploring private mortgage rates in Ontario, you’re likely weighing your options after hitting a wall with traditional lenders. Maybe your credit took a hit, your income is irregular, or a bank simply said no. Whatever the reason, private mortgages exist to fill that gap, but the rates and fees attached to them vary widely, and understanding what you’re getting into matters before you sign anything.
Private mortgage interest rates in Ontario typically range from 8% to 18%, depending on factors like your property’s equity, location, loan-to-value ratio, and the lender’s own risk assessment. On top of that, you’ll encounter lender fees, broker fees, and legal costs that can add thousands to your total borrowing cost. Knowing these numbers upfront puts you in a stronger position to negotiate and compare.
At Private Lender Inc., we’ve spent over 20 years arranging equity-based second mortgages across Canada, Ontario included. This article breaks down current private mortgage rates, the fees you should expect, typical loan terms, and what actually drives the cost of borrowing from a private lender. Whether you’re a homeowner, a broker, or an investor, this guide gives you the hard details without the runaround.
Why private mortgage rates in Ontario run higher
Private lenders operate outside the regulatory framework that governs banks and credit unions. They don’t have access to cheap capital in the same way chartered banks do, and they extend credit to borrowers that institutional lenders have already turned away. That elevated risk profile is the primary reason private mortgage rates in Ontario sit well above what you’d see on a standard bank rate sheet.
Risk is the main driver
When a bank lends money, it relies heavily on your credit score and income to assess whether you’ll repay. Private lenders, by contrast, focus almost entirely on your property’s equity and its location. Because they’re extending credit to borrowers who carry more financial uncertainty, they price that uncertainty into the rate. The less conventional your financial profile, the higher the perceived risk, and the higher the rate you’ll be offered.
The rate a private lender quotes you is essentially their way of pricing the probability that something goes wrong during the loan term.
Another factor is loan duration. Most private mortgages run for short terms of six to twenty-four months, which means the lender collects fewer interest payments to cover their cost of capital. That compressed timeline pushes rates higher compared to a 25-year amortised bank mortgage.
Loan-to-value ratio matters most
Your loan-to-value ratio (LTV) is the single figure lenders scrutinise most closely. If your property is worth $700,000 and you’re requesting a second mortgage of $100,000 on top of an existing $350,000 first mortgage, your combined LTV sits at roughly 64%. Most private lenders in Ontario prefer to stay below 75% to 80% LTV, and deals that push past that threshold either get declined or priced significantly higher to offset the added exposure.
Location carries real weight too. Urban properties in cities like Toronto or Ottawa attract better rates than rural or remote properties, because urban real estate is quicker to liquidate if a lender needs to recover funds through a power of sale.
Current private mortgage rates in Ontario for 2026
As of early 2026, private mortgage rates in Ontario generally fall between 8% and 18% annually, depending on your position in the lending stack and your property’s equity. First mortgages from private lenders sit toward the lower end of that range, while second mortgages carry higher rates to reflect the increased risk lenders take on if a power of sale is triggered.
First mortgages vs. second mortgages
Private first mortgages typically price between 8% and 12%, assuming your LTV stays below 70% and the property sits in a desirable location. Second mortgages, which are junior to the existing first mortgage, generally land between 12% and 18% because those lenders stand further back in line during any recovery process.
Even at the lower end of the range, private rates are roughly double what a bank would offer a well-qualified borrower, which is why most borrowers use private mortgages as short-term bridges rather than long-term solutions.
What moves your rate up or down
Several specific factors push your rate in either direction. Properties in major urban centres like Toronto or Hamilton attract lower rates due to stronger resale markets. Higher LTV ratios, poor credit history, and rural locations all push your rate toward the top of the range. Knowing which factors apply to your situation helps you negotiate more effectively with lenders before you commit to any terms.
Private mortgage fees and real total cost
The interest rate is only part of what you actually pay when borrowing through a private mortgage. Fees can add 3% to 6% of the loan amount to your total cost at closing, which means a $100,000 loan could cost you $3,000 to $6,000 before a single dollar lands in your account. Understanding these charges upfront stops surprises at the closing table.
Lender and broker fees
Lender fees typically run between 1% and 3% of the loan amount and cover the cost of arranging and underwriting the deal. If you work through a mortgage broker, broker fees add another 1% to 2% on top of that. Both sets of fees are usually deducted directly from your loan proceeds at closing rather than paid out of pocket, which reduces the net amount you actually receive.
Always ask your lender for a full fee disclosure before you commit, so you can calculate the true cost of borrowing against the amount you’ll actually have access to.
Legal and administrative costs
Legal fees on a private mortgage in Ontario generally range from $1,500 to $2,500, covering both your own lawyer and the lender’s independent legal representation. When you stack private mortgage rates Ontario lenders charge alongside lender fees, broker fees, and legal costs, your effective annual cost of borrowing can land noticeably higher than the stated interest rate alone suggests. Running these numbers together, not separately, gives you an accurate picture of what this financing actually costs you.
Terms, payment options, and common conditions
When you look beyond private mortgage rates Ontario lenders advertise, the structure of the loan itself shapes what you actually pay month to month. Most private mortgages run for six to twenty-four months, making them short-term bridges rather than long-term commitments. You’re expected to refinance, sell, or clear the balance when the term ends, so entering with a clear exit strategy matters from the start.
Payment structures
Interest-only payments are standard across most private mortgage arrangements. You pay the interest each month without reducing the principal, which keeps your monthly cost predictable during the term. Some lenders allow you to pre-pay several months of interest directly from the loan proceeds at closing, reducing your monthly obligation if cash flow is tight.
Pre-paying interest at closing lowers the net funds you receive, so calculate your actual borrowing need against the gross loan amount before finalising anything.
Common conditions lenders attach
Private lenders attach specific conditions to every deal. An open mortgage clause allows early repayment without penalty, which gives you the flexibility to refinance once your financial position improves. Lenders also require an independent property appraisal, valid home insurance, and separate legal representation for both parties before any funds are released. Preparing these documents in advance keeps your closing timeline on track and avoids last-minute delays that can push your funding date back unnecessarily.
How to compare lenders and choose an exit plan
Not every private lender in Ontario operates the same way, and the cheapest rate does not automatically mean the best deal. Before you commit, compare the total cost of borrowing, not just the stated interest rate, by adding up the lender fee, broker fee, legal costs, and any prepayment conditions attached to each offer.
What to look for when comparing lenders
Request a full fee disclosure from every lender you approach and calculate your effective borrowing cost on each one using the same gross loan amount. Ask specifically whether the mortgage is open or closed, since an open mortgage lets you repay early without penalty once your financial situation improves.
A lender who offers a slightly higher rate on an open mortgage will often cost you less overall than one offering a lower rate on a closed term with heavy prepayment penalties.
Building a realistic exit plan
Private mortgage rates Ontario lenders charge are designed for short-term borrowing, so entering without a clear exit plan puts you at real risk of rolling into a second term and paying fees all over again. Your exit options typically include refinancing with a traditional lender once your credit or income stabilises, selling the property, or drawing on other assets to clear the balance before the term ends. Identify your most realistic path before you sign anything.
Final takeaways
Private mortgage rates Ontario lenders offer sit between 8% and 18% annually, and the rate you receive depends on your property’s location, your LTV ratio, and how much risk a lender perceives in your file. Fees stack on top of that rate, so your true cost of borrowing is always higher than the headline figure suggests. Add up every charge before you commit.
Second mortgages carry higher rates than firsts, and short loan terms of six to twenty-four months mean you need a credible exit plan before you sign. Whether you plan to refinance with a traditional lender once your credit improves or sell the property to clear the balance, that plan should be in place from day one.
If you want to stay informed on private lending in Canada, visit our private mortgage blog for practical guides on equity-based borrowing, investor opportunities, and broker resources.