Private first mortgage: rates, fees and the twelve-month exit

A private first mortgage is a mortgage in first position on your title, funded by a private investor rather than a bank. It replaces your existing first mortgage entirely rather than sitting behind it, which is why it prices lower than a private second: the lender is first in line if the property ever has to be sold, so it carries the least risk of any private position.

In August 2026 a private first typically runs about 7% to 11% interest-only with a lender fee of 1% to 3%, to roughly 75% to 80% of appraised value. Where you land inside those ranges is set almost entirely by loan-to-value and by how quickly the property would sell. A 55% loan-to-value detached house in a major city prices near the bottom. A 75% loan-to-value acreage two hours from anywhere prices near the top, if a lender takes it at all.

This page covers what a private first actually costs once the lender fee, broker fee, legal and appraisal come off the advance, the mechanics that catch people out at maturity, and the exit plan that gets you into a B lender inside twelve to eighteen months. If you already have a first mortgage you want to keep, a private second is a different product and a different page.

When a private first mortgage is the realistic option

A private first replaces your bank's charge. That is a big step, so the reasons for taking it tend to be specific and urgent.

What is a private first mortgage and how is it different from a bank first?

A private first mortgage is a first-position charge on your property funded by an investor: a mortgage investment corporation, a mortgage fund, or an individual lending their own capital. Legally it is the same instrument as a bank first mortgage. It is registered on title in first position, it has the same enforcement rights, and the same discharge process applies when it is repaid.

Everything else is different. The term is short, typically six to twenty-four months, with twelve months by far the most common. Payments are interest-only, so the balance you owe at maturity is the balance you borrowed. Qualification looks at appraised value, loan-to-value, property type and marketability rather than at debt service ratios, and the OSFI minimum qualifying rate of contract rate plus 2% or 5.25% does not apply, because private lenders are not federally regulated institutions.

The trade for all that flexibility is price and time pressure. You are paying roughly two to seven percentage points above a B-lender rate and roughly three to seven above an A-lender rate, and you are doing it on a clock. That combination is workable for one year with a plan. It is corrosive over three.

Private first mortgage against the institutional alternatives, August 2026

Private first mortgage rates by loan-to-value in 2026

Private first mortgage rates are quoted as a ladder against loan-to-value, not as a single posted number. The reason is simple: the equity underneath the loan is the lender's protection, and every band of loan-to-value you climb removes some of it. A lender at 55% can be badly wrong about value and still be repaid. A lender at 78% cannot.

The table below is the shape of the Ontario market in mid-2026, and British Columbia and Alberta price similarly in their major centres. Two adjustments move a file within it. Marketability: rural properties, acreage, condominiums in oversupplied buildings and anything with a small pool of buyers price a band or two higher, and some lenders cap them at 65% regardless. Loan size: below about $150,000 the minimum fee, commonly around $3,500, starts to dominate the effective cost even when the rate looks reasonable.

Push back on your own borrowing request before you accept a band. Asking for $460,000 instead of $500,000 on a $650,000 house moves you from 77% to 71% loan-to-value, and on this ladder that is worth roughly a point of rate and half a point of lender fee. On a one-year term that is real money for a request you probably did not need rounded up.

Private first mortgage pricing by loan-to-value, urban Ontario, BC and Alberta, 2026

Where the 35% ceiling sits

Canada's criminal rate of interest has been an annual percentage rate above 35% since January 1, 2025, down from the previous effective annual rate of 60%. Nothing in mainstream private residential lending approaches that, and it should never be presented as a benchmark. It is worth knowing simply because it is the outer legal boundary: a residential mortgage priced anywhere near it is not a private mortgage, it is a problem.

What a private first mortgage really costs after the fees

The quoted rate understates the cost, because every fee comes off the advance. You sign for the full loan amount and pay interest on the full loan amount, but the money that reaches your lawyer's trust account is the loan minus the lender fee, minus the broker fee, minus legal, minus the appraisal, minus any interest reserve. Divide the total first-year cost by that net figure and you have the number that actually matters.

Payments themselves are straightforward. Canadian mortgages compound semi-annually, so the monthly interest-only payment is the balance multiplied by ((1 + annual rate ÷ 2) raised to the power of 2 ÷ 12) − 1. On $500,000 at 8.99% that is $3,677.62 a month, and $500,000 still owing at maturity.

The table below runs the same $500,000 one-year interest-only private first at four points on the pricing ladder, with $3,400 of legal and appraisal costs in every row. The spread between the first column and the last is the entire argument for shopping the file properly.

Effective first-year cost of a $500,000 one-year interest-only private first mortgage

Interest-only payments, interest reserves and open versus closed

Interest-only is the default and it is a deliberate design choice, not a trick. Keeping the payment low protects your cash flow during the year you are supposed to be repairing whatever went wrong. The cost is that the balance does not move, so the exit has to refinance the full original amount plus whatever you have added.

A prepaid interest reserve is a holdback of three, six or twelve months of payments taken from the advance, with the lender paying itself each month from the reserve. Lenders use it where income is temporarily interrupted: a renovation with the property vacant, a business restructuring, a borrower between contracts. It guarantees a perfect payment record for the reserve period, which genuinely helps the exit, and it reduces your net cash by exactly that many payments. On $500,000 at 8.99% a six-month reserve removes $22,066 from what you receive. Plan for it in the loan size.

Open or closed is the question borrowers most often forget to ask. Fully open means you may repay at any time without penalty, which is what you want if the exit could arrive early or if a sale is possible. Closed for three or six months and open afterwards is a common compromise. Fully closed for twelve months means an early payout still owes the remaining interest, and that can eliminate the benefit of an early B-lender approval.

Finally, watch the charge type. A standard charge is registered for the loan amount and is simple to discharge or to register behind later. A collateral charge is registered for an amount that can exceed the loan and can block secondary financing. On a private first that you intend to exit within a year, a standard charge keeps your options open.

• Monthly payment = balance × ((1 + annual rate ÷ 2) ^ (2 ÷ 12) − 1)
• Balance at maturity equals balance at funding, unless you make voluntary lump sums
• An interest reserve reduces your net advance by one payment per month reserved
• Confirm in writing whether the mortgage is open, partially open or fully closed
• Prefer a standard charge over a collateral charge on short-term private money
• Confirm the discharge fee, usually $300 to $600, before you sign, not at payout

Buying a property with a private first mortgage

Private first mortgages are used on purchases as well as refinances, and the arithmetic changes in one important way: on a purchase the fees cannot be netted out of an advance that has to arrive in full at closing. Your lawyer needs the whole purchase price funded. So the lender fee, broker fee, legal and appraisal come out of your own money on top of the down payment, and you have to budget for them from the start.

The usual reason for a private purchase is the property rather than the buyer. Acreage above the lender's servicing limit, a home with no potable water certificate, a property with an unfinished addition, a cabin with seasonal road access, or a purchase where the buyer's income is fine but does not document in the time available. Private lenders will underwrite these, at 65% to 75% loan-to-value, on the strength of an appraisal that reflects the property as it actually is.

Provincial closing costs sit on top. Ontario land transfer tax applies on the purchase price, with an extra municipal land transfer tax inside the City of Toronto. British Columbia charges property transfer tax. Alberta charges no land transfer tax at all, only land titles fees of $50 plus $5 per $5,000 of value, which is why the cash-to-close on an Alberta purchase is materially lighter than the equivalent Ontario deal.

The exit on a purchase file is almost always the property, not the borrower. Fix what made it unfinanceable, get a fresh appraisal, then refinance to a credit union or a B lender that can now see a conventional property. Size the term to the work with a buffer of at least three months, because certifications and inspections run late far more often than they run early.

• Budget lender fee, broker fee, legal and appraisal on top of the down payment
• Expect 65% to 75% loan-to-value on rural, acreage or non-conforming property
• Order the appraisal early, because rural appraisals take longer and cost more
• Alberta charges no land transfer tax, only land titles fees of $50 plus $5 per $5,000
• Set the term to the remediation timeline plus a three-month buffer

Maturity, renewal and what happens if the exit slips

A private first mortgage is due in full on its maturity date. There is no automatic renewal clause, no statutory grace period and no obligation on the investor to offer you anything. Borrowers who have only ever had bank mortgages, where a renewal letter arrives six months early with three options on it, are regularly caught by this.

Four things can happen. The lender offers a renewal, usually for a fee of 1% to 2% and sometimes at a higher rate if loan-to-value has drifted up. You refinance into a B or A lender, which is the plan. You sell. Or the lender enforces. In Ontario that means power of sale under the Mortgages Act, where the lender must wait at least fifteen days after default before serving a notice of sale and then must allow a thirty-five day redemption period. In British Columbia and Alberta enforcement is judicial: a petition or statement of claim, a court hearing, and a redemption period the court sets, commonly six months in BC and three to six months in Alberta. In every case the lender's legal costs are added to what you owe.

Renewal is usually available to a borrower who has paid every month on time and whose property has held its value. It is not a right. And it is not cheap: a 1.5% renewal fee on a $450,000 private first is $6,750 in cash, on top of another year at 9% or 10%. Two renewals and you have paid three sets of fees on money that was meant to be temporary.

The defence is scheduling. An institutional refinance needs three to five weeks from application to funding when the file is clean, and longer when a payout statement, an appraisal and two lawyers all have to line up. Start at month eight of a twelve-month term. If you reach month ten and the exit is not ready, you still have leverage to negotiate a sensible renewal rather than accepting whatever is offered in the last fortnight.

Licensing, disclosure and how to check who you are dealing with

Private mortgage lending is legal across Canada and is arranged through mortgage brokerages licensed by the province, not by a federal regulator. Ontario brokerages are licensed by the Financial Services Regulatory Authority of Ontario, British Columbia brokerages by the BC Financial Services Authority, and Alberta brokerages by the Real Estate Council of Alberta. Each maintains a public register you can search in a couple of minutes.

Before you commit to a brokered private mortgage you are entitled to a written disclosure statement. It must set out the material terms of the loan, every fee the brokerage will receive from you and from the lender, the identity and calculation basis of third-party fees, and any incentive attached to placing the deal. In Ontario the disclosure has to reach you at the earliest opportunity and no later than two business days before you are asked to commit, and remuneration must be paid to the brokerage rather than directly to an individual agent.

Read it against what you were told. The commitment letter governs, not the phone call. Check the loan amount, the rate, the term and maturity date, the fee percentages, whether the mortgage is open or closed, the renewal terms and the discharge fee. If a number differs, ask why before you sign rather than after the lawyer has been instructed.

• Verify the brokerage licence number on your provincial regulator's public register
• Insist on the written disclosure statement before you commit
• Confirm every fee percentage in writing and in dollars
• Confirm maturity date, renewal fee, renewal criteria and discharge fee
• Never pay a fee up front to secure an approval. Fees come off the advance at closing

The exit: getting from a private first into a B or A lender

The exit from a private first is usually a B lender first, then an A lender at the following renewal. B-lender fixed rates on the July 2026 Ontario rate cards ran roughly 4.69% to 7.00% depending on lender and term, with a lender fee of about 1% and a maximum of 80% loan-to-value. Moving a $450,000 mortgage from 9.99% interest-only to a B lender at around 5.3% amortizing cuts the monthly cost sharply and starts paying down principal at the same time.

What a B lender needs from you is boring and specific. Twelve consecutive months of on-time payments on every account, because one thirty-day late resets the clock at most of them. Revolving balances under 30% of each limit, with accounts left open rather than closed, since closing a card shrinks your available credit and pushes utilisation up. Two years of filed T1 Generals and Notices of Assessment if you are self-employed, and a CRA balance at zero. Any collections settled and reported as settled, which takes thirty to sixty days to appear on your file.

Where the private first was taken because of the property, the checklist is different: finish the work, certify the well and septic, close the open building permit, get the tenant onto a written lease so the rent counts, then order a fresh appraisal. An institutional lender is not underwriting your intentions, it is underwriting what an appraiser can see and document.

Then work backwards from maturity. Month eight, pull your own credit reports and dispute anything wrong. Month nine, apply. Month ten, appraisal ordered and lawyer instructed. Month eleven, funded and the private charge discharged. That sequence assumes nothing goes wrong, which is exactly why it starts at month eight.

• A written exit target before funding: lender class, rate, loan-to-value and date
• Twelve consecutive on-time payments on every account, without exception
• Revolving utilisation under 30% per card, accounts left open
• Two years of filed returns and a zero CRA balance if self-employed
• Property remediation finished and re-appraised by month eight
• Exit application submitted at month nine, not at maturity

How Lendmax prices and places a private first mortgage

First position is where private lenders compete hardest, because it is the safest private money there is. Two mortgage investment corporations looking at the same house, the same borrower and the same 68% loan-to-value will regularly come back three quarters of a point and half a point of lender fee apart. That spread is the reason to run the file properly rather than take the first commitment offered.

Our job is to find the lowest effective cost that will actually fund on your timeline, and to write the exit before the deal is placed rather than after.

1. We rule out the cheaper first mortgages first — Before anything else we test whether an A-lender or B-lender first clears, and whether the file could be saved by an institutional lender at all. If your bank is declining a renewal on two late payments, a B lender at roughly 1.0% to 2.0% over A rates may well take it, and that is several points cheaper than private.
2. AVM value first, then position the request into the lowest band — An automated valuation model gives an early read on value so we can size the loan into the cheapest loan-to-value band that still solves the problem. Coming in at 68% rather than 76% is typically worth a full point of rate and half a point of lender fee, decided before an appraiser is paid.
3. Offers restated as effective cost on net cash — We rebuild each commitment as interest plus lender fee plus broker fee plus legal plus appraisal plus any interest reserve, divided by the money that reaches your lawyer. On loans under $200,000 the minimum fee often reorders the offers entirely, and the cheapest quoted rate loses.
4. The exit written, dated and diarised before funding — Target lender class, target rate, target loan-to-value, target date, and the list of what has to be true about your credit, your filings or your property by then. We set the reminder at month eight and start the exit refinance then. Documents are signed electronically and funding is usually 7 to 14 business days.

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