What Is a Private Mortgage?
A private mortgage is a loan secured against Ontario real estate that does not come from a bank or credit union. The lender is a person, a company, a mortgage investment corporation, or a syndicate. The security is a charge registered on title, the same way a bank mortgage is.
People use them when a bank will not fund the file, when the timeline is short, or when income does not fit a bank checklist: self-employed, a bridge before a sale closes, a second mortgage, debt consolidation, tax arrears. Approval leans on the property and the equity, not only the credit score.
The rate is usually higher. The term is usually short. Interest-only is common. That is the trade for speed and flexibility. It is not a cheaper bank mortgage with a different logo.
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You Need a Lawyer. You Usually Need Two.
A private mortgage still has to be registered in Teraview. Only a licensed Toronto real estate lawyer does that. The lawyer also reads the commitment against what actually gets registered, searches title, and moves the funds.
The Law Society of Ontario treats private mortgages as a conflict file. In most of these deals, one lawyer cannot act for the borrower and the lender. Each side has their own counsel.
The borrower often pays both legal bills. That is in the commitment more often than people expect. Read that line before you treat the rate as the whole cost.
Independent legal advice is not the same as running the file
Some lenders require a certificate of independent legal advice before they advance. ILA is a focused meeting: you understand the document, you are signing voluntarily, the lawyer has no conflict. It is not full representation of the closing.
If you are the borrower, you usually want a lawyer on the file, not only a certificate. If you are a guarantor or a spouse who is not on title, ILA is often the right product. Do not mix the two up when you are comparing quotes.
Parents helping with a purchase face the same fork: gift money, guarantee the bank mortgage, or take title. The bank of mom and dad Ontario guide walks through that split before a private charge is layered on top.
What the Lawyer Actually Does
The work is a refinance-style closing with messier paper.
The commitment
The commitment is the deal: principal, rate, lender fee, broker fee, term, payment, prepayment, default, who pays whose lawyer, and when the money has to be repaid. The registered charge and the Standard Charge Terms have to match what you thought you signed. That gap is where files go wrong.
Title
The lawyer runs a title search. Existing mortgages, liens, executions, and who is on title all decide whether the new charge can go on, and in what priority. A second private mortgage behind a bank charge is a different file from a first that pays the bank out.
A bank collateral charge registered near the full value of the home can also squeeze what a second private lender will fund, even when the outstanding balance looks lower. See collateral charge vs conventional mortgage in Ontario for how registration type shows up on title.
Title insurance, funds, registration
Most private lenders require a lender's title insurance policy before they advance. The lawyer registers the new charge, pays out what the commitment says gets paid, and discharges what is supposed to come off. Funds still go through trust. Signing can be virtual.
None of that is skipped because the lender is private. The land registry does not care.
The Terms People Miss
Read the whole commitment, not the rate line.
Term and exit. Most private mortgages are months to a couple of years, not a five-year bank term. When it matures you repay, renew, or refinance. Renewal is not guaranteed. If you do not have an exit, the short term is the cost.
Lender fee and broker fee. These sit on top of interest. They are often deducted from the advance, so you do not receive the headline principal. Legal fees, searches, registration, appraisal, and title insurance sit next to them.
Prepayment. Some files let you pay out early. Some charge for it. Do not assume you can refinance out for free next spring.
Default. A private charge is enforceable like any other Ontario mortgage. Missed payments can move into power of sale. The clock is short. Call the lawyer when you first see trouble, not after a notice of sale.
Interest and fees together. There is a criminal interest ceiling in the Criminal Code. Lender fees, bonuses, and some penalties count toward it. That is a lawyer check on the commitment, not a brochure line.
What This Costs on the Legal Side
The legal bill is not the loan. All-inclusive legal fees on a standard residential purchase start at $2,299, and on a sale at $1,999, plus HST. A private mortgage is not that file. It is more work: a new charge, often a discharge, a commitment that is not a bank's standard instructions.
I do not publish a dollar adder for private mortgages. Get the quote for the file you actually have. See real estate legal fees for how a legal bill is built, then ask what knocks this one out of a flat fee.
Budget the lender fee, the broker fee, both lawyers if you are paying both, and the disbursements. A quote that is only "legal fees" is not a quote.
If You Are the Lender
You need your own lawyer. Using the borrower's lawyer is the conflict. Your protection is the charge on title, prepared so it can be enforced if the borrower defaults. That means the search, the registration, and the terms, not a handshake and an e-transfer.
If you lend as a business, or you are pooling other people's money, the Mortgage Brokerages, Lenders and Administrators Act and FSRA sit on top of the real estate work. That is a different conversation from one occasional mortgage of your own funds.
A private mortgage is still a closing. The lawyer, the trust ledger, and Teraview do the same job as a bank refinance. The paper is less standardized, the term is shorter, and each side needs someone whose only client in the room is them.
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Zachary Soccio-Marandola
Real Estate Lawyer
Direct: (647) 797-6881
Email: zachary@socciomarandola.com
Frequently Asked Questions (FAQ)
Can one lawyer act for me and the private lender?
Usually no. Private mortgages are a conflict file. Each side has their own lawyer. If a quote has one lawyer for both of you, that is a warning, not a saving.
Do I pay the lender's lawyer too?
Often yes. Many commitments put both legal bills on the borrower. Read that line before you compare quotes.
Is independent legal advice the same as hiring a lawyer for the closing?
No. ILA is a certificate that you understood the document and signed voluntarily. Running the file is title, registration, funds, and the commitment. Lenders sometimes require ILA as well as, not instead of, your own lawyer.
Do I need title insurance on a private mortgage?
Most private lenders require a lender's policy before they advance. An owner's policy is a separate question and is still worth having if you do not already have one.
Can I pay a private mortgage off early?
Only if the commitment says so, and sometimes not for free. Prepayment is a clause, not a courtesy. Read it before you treat the private loan as a short bridge.