Distinguish this sharply from everything else in this course. LTV, ratios and disclosure timing are set by a regulator or a lender's own policy, and they can move. The criminal rate of interest is an offence under section 347 of the Criminal Code, and it applies to every private mortgage in Canada regardless of province, lender type, or what anyone in the deal agrees to.
As of January 1, 2025, the Criminal Code defines a "criminal rate" as an annual percentage rate of interest — calculated in accordance with generally accepted actuarial practices and principles — that exceeds 35% on the credit advanced. This replaced a prior ceiling expressed as an effective annual rate of roughly 60%, which worked out to an APR-equivalent of about 48%. Brokers and lenders who learned this business under the old ceiling need to recalibrate: a deal that would have cleared the previous line can breach the current one.
This is the practically dangerous part. The calculation captures most charges connected to the credit advanced, with only specific carve-outs from the definition of "interest" — repayment of the credit advanced itself, certain insurance charges, official fees and registration costs, overdraft charges, required deposit balances, and property tax payments on a mortgage. Lender fees, broker fees and similar charges are generally not excluded, which means they count toward the effective rate. A private mortgage advertised at a reasonable-sounding stated rate can still cross 35% once its fees are folded in, and structuring around exactly that risk is a broker's job, not just a lawyer's.
The federal Criminal Interest Rate Regulations create narrow carve-outs above the 35% cap: loans of $10,000 or less stay subject to the 35% cap regardless. Genuinely commercial loans — to a business, for business purposes — between $10,000 and $500,000 may carry up to 48% APR, and commercial loans above $500,000 face no rate cap at all under these regulations. The common misreading to guard against: a large private mortgage to an individual borrowing for personal reasons — buying or keeping a home, consolidating personal debt — is a consumer transaction, not a commercial loan, regardless of its dollar size. The higher-threshold carve-outs generally do not apply just because the loan is big.
This is underwriting knowledge, not only a lawyer's concern at the documentation stage. A broker structuring the rate, the term and every fee on a private deal needs to model the full APR before presenting terms to a client — finding out at the lawyer's desk that the structure breaches section 347 means unwinding a deal the client thought was already done.
Whenever fees are meaningful relative to the loan size and term — which is common on shorter private terms, since fees amortize over less time — run the full APR, rate plus fees over the actual term, before quoting the deal. Don't eyeball the stated rate alone and assume it's the whole story.
A one-year private second mortgage is offered at a 13% stated interest rate, but carries a lender fee and a broker fee that together add several more percentage points once amortized over the one-year term. Why does this deserve close attention under the criminal interest rate rules?
The criminal rate is measured as an all-in APR, not the headline interest rate, and most fees connected to the advance count toward it — a short term makes this worse because fees amortize over fewer months, pushing the effective annual rate up. The "only the stated rate matters" option is the most dangerous misconception in this whole module, because it's exactly the reasoning that leads a broker to structure a deal that looks fine on paper but is actually a Criminal Code violation.
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