With a bank mortgage, most people never see a fee beyond legal costs. Private mortgages are different: fees are a normal part of the deal, and they can make a big difference to what you actually pay. Here’s what each one is for, how they’re usually paid, and what to ask before you sign.
The common fees
Lender fee
Charged by the private lender for setting up the mortgage. It’s usually a percentage of the loan amount and is one of the largest costs.
Broker fee
Charged by the mortgage brokerage for finding the lender, preparing the file and negotiating terms. Not every deal has one, and the amount varies. A broker should tell you about their fee up front, in writing.
Legal fees
In Alberta, a lawyer prepares and registers the mortgage at Land Titles. You’ll pay your own lawyer, and many private lenders also require the borrower to pay the lender’s legal costs. Ask whether there will be one lawyer or two.
Appraisal
Private lenders lend against equity, so they almost always want an independent appraisal of the property. You typically pay for it up front, before the mortgage is approved.
Other costs you may see
- Title insurance or title search costs
- Discharge fees when the mortgage is paid off
- Renewal fees if you extend the mortgage at the end of the term
- Administration or NSF fees for missed or returned payments
- Prepaid interest or an interest reserve, where some payments are taken from the loan at closing
How fees are usually paid
Most lender and broker fees are taken from the mortgage funds at closing, so you don’t pay them out of pocket. That’s convenient, but it means you’re borrowing them, and paying interest on them, too. The appraisal is the main cost usually paid before closing.
Compare total cost, not just the rate
A lower rate with high fees can cost more than a higher rate with low fees, especially on a short term. To compare offers fairly, ask each one for:
- The interest rate and payment amount
- Every fee, in dollars
- The total you’ll pay over the full term, including fees
- The amount you’ll actually receive after fees and payouts
- What renewal will cost if you need more time
For more on what moves the rate itself, see What Drives Private Mortgage Rates.
Questions to ask before you sign
- Is any fee charged even if the mortgage doesn’t close?
- Are any fees refundable?
- What does it cost to renew, and to pay off early?
- What fees apply if a payment is late?
- Who pays the lender’s legal costs?
A licensed broker should answer all of these clearly. If anyone asks for a large fee up front, before you have a written approval, treat it as a warning sign. See our list of red flags when choosing a private lender.
Get the numbers in writing
Fees vary between lenders and deals. A licensed mortgage broker can show you the full cost of each option side by side.
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.