What makes a private mortgage rate higher?

Equity is the biggest single factor - a lower combined loan-to-value prices better. Premiums apply for non-owner-occupied and rental properties, rural locations, homes on well and septic rather than municipal services, and thinner-population areas. Position matters too: second position costs more than first, and third more again.

Do fees matter more than the rate on a private mortgage?

On a one-year term they often do. A percentage point over twelve months on a modest balance is smaller than most people expect, while a few thousand dollars in lender and broker fees over the same period is larger. The only fair comparison is total dollars over the same period, including rate, lender fee, broker fee, legal, appraisal and registration.

Answers › A, B & Private Lending

What interest rate do private and second mortgages charge?

Q: What interest rate do private and second mortgages charge in Ontario?

Higher than a bank and higher than a B lender - that is the trade for flexibility and speed. No honest number can be given before the file has been seen, because it depends on equity, the property, the situation and the exit strategy. MICs also look at credit. Expect a clear cost breakdown in dollars rather than a quoted rate up front.

Answered by Rajiv Verma, Mortgage Broker · Reviewed 13 August 2026 · About a 4 minute read

The direct answer

Higher than a bank, and higher than a B lender. That’s the trade for flexibility and speed. I won’t quote you a number on a web page, because it genuinely depends on your equity, the property, the situation and your exit strategy — and MICs look at credit too. What I will promise is a clear, honest cost breakdown in dollars once I’ve seen the details. Be wary of anyone who quotes you a rate before they’ve seen anything.

THE SHORT VERSION

Private > B lender > bank — that’s the order, always
No honest number can be given before someone has seen the file
Equity is the biggest single factor
Rate premiums apply for: non-owner-occupied, rental, rural, well and septic, and thinner-population areas
On a one-year term, the fees can matter more than the rate

Why nobody credible quotes a private rate up front

A bank rate can be advertised because a bank lends to one narrow profile. Everyone who qualifies looks broadly the same, so one number fits.

Private lending is the opposite. Every file is different — different equity, different property, different reason, different exit. A number quoted before any of that is known is a guess, and usually an optimistic one designed to get you on the phone.

If a site quotes you a private rate before seeing your file, treat that as marketing rather than information. The number you’re eventually offered will be the real one, and it may look nothing like the advertised figure.

What actually moves the rate

Your equity — the biggest factor

The lower the combined loan-to-value, the lower the risk and the better the pricing. A file at 60% of value prices very differently to one at 79%.

The property itself

This is where private lending differs most from bank lending, and where the specifics matter:

Owner-occupied — the best pricing
Rental or investment property — a premium applies
Rural — a premium, because it’s harder to sell if anything goes wrong
Well and septic rather than municipal services — another premium
Thinner-population areas — fewer buyers means more risk

Those five factors are the ones almost no site mentions, and they’re often why a quoted rate and a final rate differ. A property outside the GTA on well and septic is a different risk to a semi in Brampton, and it gets priced that way.

Your exit strategy

Private lenders — MICs especially — want to know how this ends. A file with a clear, credible route back to B or A lending prices better than one without.

Credit

Not decisive the way it is at a bank, but MICs do look at it. It affects pricing more than approval.

Position and term

Second position carries more risk than first, so it costs more. Third position more again.

Why the fees can matter more than the rate

On a one-year deal, this is the part people get wrong.

A percentage point sounds dramatic. Over twelve months, on a modest balance, it’s a smaller number than most people expect. A few thousand dollars in lender and broker fees, over that same twelve months, is a larger one.

So comparing two offers on rate alone can lead you to the more expensive one. The only fair comparison is total dollars over the same period — rate, lender fee, broker fee, legal, appraisal and registration together.

That’s what I show you. Not the percentage — the dollars.

How to lower what you’ll be offered

Borrow less. The single most effective lever. Dropping the loan-to-value materially improves pricing.

Have a real exit plan. Not a hope — a documented route with a timeline.

Get the property presented properly. A clean appraisal with good comparables removes doubt, and doubt costs money.

Don’t shop it around yourself. A file that has been to six lenders looks shopped, and shopped files price worse.

When the rate should stop you

When the payment doesn’t work. If it’s tight at the quoted rate, it’s the wrong deal at any rate.

When the cost exceeds the problem. Borrowing expensively to solve something smaller than the borrowing costs is a bad trade.

When you’d qualify at a B lender. Private pricing on a file that a B lender would take is an expensive mistake, and it happens when nobody tests the cheaper tier first.

What to do next

Send me the property, your balances, and what you’re trying to achieve. You’ll get a full dollar breakdown — every fee, the total cost, and an honest view of whether a cheaper tier would take the file.

Talk it through →

Related questions

Answered by Rajiv Verma, Mortgage Broker · Mortgage Architects — FSRA Brokerage Licence #12728 · Licensed in Ontario · Office 289.505.0631 · Direct 647.291.7116

General information about Ontario mortgages — not financial, legal or mortgage advice. Rates and fees vary by lender, property and file, and change with market conditions. No rate is quoted or implied on this page. Every file is reviewed individually.