The real risks of private mortgages, stated honestly.

The headline interest rate is only part of the cost. A lender fee and a broker fee are typically added on top, often deducted directly from the loan proceeds rather than paid separately — which means the client receives less cash than the face amount of the loan while still owing the full principal. Exact rate and fee figures vary widely by lender, equity position, and property, and should always be confirmed and disclosed per deal rather than assumed from a general range.

This is precisely what cost-of-credit disclosure exists to make transparent, and it's an area FSRA has specifically flagged in its compliance examinations of private mortgage files. A client comparing two private offers should be looking at the total dollar cost over the term — interest plus both fees — not just the headline rate each lender quotes.

It's also worth clients understanding that a lower headline rate isn't automatically the cheaper offer once fees are included — a lender charging a slightly higher rate with a lower upfront fee can cost less overall on a short term than one advertising the lowest rate on the page. The only way to compare honestly is the total dollar figure over the actual term, not the rate in isolation.

Because most private terms are short and often interest-only, the full principal is due on a fixed date — not a reduced balance from gradual paydown. If the planned sale, refinance, or income improvement isn't ready, the realistic paths are a private renewal at a further fee, a rushed refinance under time pressure, or default. None of those is catastrophic on its own, but all three cost more than the exit the client originally planned for.

See interest-only private mortgages for why the payment structure itself is a driver of this risk, and how comparing structures upfront changes what's owed at renewal.

The clients most exposed to this failure mode aren't necessarily the ones with the weakest files — they're the ones whose exit depended on a single event happening on schedule, like one specific sale closing or one specific credit milestone landing exactly on time, with no fallback if it slipped by even a month or two.

Building a fallback into the exit plan from the start — a second option if the primary one slips, even a less attractive one like a further private renewal at a known cost — turns a hard deadline into a manageable one, and gives the client a decision to make in advance rather than a crisis to react to.

That fallback doesn't need to be elaborate. Even a simple written note confirming which lender the client would approach for a private renewal, and roughly what it would cost, turns an unplanned scramble into a known, if undesirable, option the client already understands.

In Ontario, under the Mortgages Act, a lender can begin power of sale proceedings three months after default, followed by a notice of sale; if the amount owing isn't repaid within 35 days of that notice, the lender can proceed to sell the property. Crucially, the borrower retains a right of redemption — the ability to stop the process at any point before the sale closes by paying the arrears, penalties, and the lender's legal costs. Proceeds from any sale go first to the debt and costs, with any surplus returned to the borrower.

Delinquency data gives a sense of scale: published Statistics Canada non-bank lender data shows mortgage investment entities consistently running delinquency rates several times higher than non-bank lenders overall, and the gap widened as rates rose — a real signal of strain concentrated in that segment, even though it remains a minority of private borrowers overall.

That data point is a reminder rather than a prediction — most private files close cleanly and exit on schedule. It exists to keep the risk conversation honest, not to frame private lending as inherently unstable.

Outside Ontario, the enforcement mechanics differ in detail — some provinces route defaults through a judicial foreclosure process rather than a non-judicial power of sale — but the underlying pattern is the same everywhere: a formal notice period, an opportunity to cure the default, and a sale process governed by provincial law rather than by whatever the private lender might prefer.

Full, plain-language disclosure of every fee before the client signs; a written, specific exit plan with a date rather than a general intention; and a check-in well before renewal, not after the term has already lapsed, are the three levers a broker actually controls. None of them eliminate the underlying cost of private credit, but together they turn a private mortgage from a gamble into a managed bridge.

For clients whose exit is graduating back to conventional financing, moving clients from private back to an A lender lays out how that timeline is actually built.

The clients who come away frustrated with a private mortgage almost always describe the same thing afterward: they understood the rate, but not the fees, the renewal deadline, or what happened if their plan slipped by a few months. The clients who come away satisfied, even after a stressful renewal, usually describe the opposite — a broker who walked them through the worst case before they signed, not just the best case.

That means naming the worst case out loud: what the total cost looks like if the exit takes six months longer than planned, and what the realistic options are at that point. It's an uncomfortable conversation to have before a client is excited about solving their immediate problem, but it's far less uncomfortable than having it for the first time after the term has already lapsed.

See the Private Lending Disclosure Checklist for the specific items that conversation needs to cover in each province.

It's a conversation worth having even with clients who never end up needing the worst-case plan. A client who understood the risk fully and had a smooth exit anyway tends to trust the broker more the next time a financing decision comes up, not less — the honesty itself is part of what builds the relationship, independent of how the file actually plays out.