Are Private Mortgages Safe?
May 3, 2026 | Posted by: Alex Vinarski
Private mortgages are generally safe when structured with a clear exit strategy and the means to make payments. However, there are a few things to watch out for to ensure you’re getting a fair deal. Here’s what you need to know:
1. Rates and Fees
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Private mortgage rates and fees vary depending on loan to value, marketability of the property and other facors, but in general:
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1st Mortgage: Fees should be around 2%, and rates form 5% to 9%
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2nd Mortgage: Fees should be around 4%, and rates from 9% to 15%
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Be cautious of brokers or lenders charging excessively high rates or fees. Always compare offers and ask questions.
2. Renewal Fees and pre payment penalty
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Some private lenders charge high renewal fees or increase rate. Before signing, ask about:
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Renewal terms.
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Any additional costs at renewal.
- Mortgage can be open or close. Close mortgage usually have 3 months interest penalty. If you need mortgage for short time, better check open mortgage option of private HELOC Home Equity Line of Credit.
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3. Lender Reliability
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If your lender is an individual, they might need funds for other projects and could choose not to renew your mortgage. While this is rare (I’ve only seen it once in 15 years), it’s a risk to be aware of.
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Mortgage Investment Corporations (MICs) are more reliable. Unless borrower missing payments, or property value drops significantly they will always renew. Many MIC's charge very small renewal fees.
4. Up front fees.
In BC brokers and lenders are not allowed charge fee on residential mortgages until mortgage is funded. The only upfront fee would be appraisal fee $400-$600 paid directly to appraiser, and in many cases Legal fee deposit $1000-$1500 paid to the lawyers, but in some cases to the lender. If lenders asking for upfront fee, this could be a scam, so be careful.
Final Thoughts
In reality, private mortgages have helped many people secure financing when traditional lenders couldn’t.
Private mortgages are a powerful tool when used wisely. By understanding the risks and asking the right questions, you can ensure a safe and successful experience. To learn more about how private mortgages work, visit my page https://www.ipotekacanada.com/index.php/private-mortgages.
