What mortgage rates and fees should I expect on a private loan?
The primary variables that determine pricing on a private mortgage are:
- Location of the Property
- Loan to Value
- Property Type
- Property Value
- Borrower Characteristics (Credit, Income, Ability to Debt Service)
- Loan Position (1st/2nd/3rd)
- Length of Term Requested
While it is important to remember that each loan is priced according to it’s specific characteristics we can generalize.
Typically 1st mortgage rates are ranging between 5.99 to 9.99
Second mortgage rates range widely depending on the above factors, but most often are between 9.99 and 12.99; however, it is possible to see rates higher/lower.
Fees range depending on how many parties are helping to prepare the loan. Going direct to a private lender will always be the least expensive option as there will be no broker fee. Similar to buying a house directly from the owner, there are no realtor commissions. The vast majority of private mortgages are arranged by mortgages brokers who typically charge 1-3%.
Lender Fees also range from 1-3%.
Toronto Single Family Residence
1st Mortgage $1,100,000
Broker Fee 1.5%
Lender Fee 1.5%
Ottawa Single Family Residence
Conventional 1st Mortgage with a Bank: $600,000
2nd Private Mortgage: $150,000
Broker Fee: 2%
Lender Fee 2%
In additional to Broker/Lender Fees, Borrowers are also responsible for all legal fees to register the loan, appraisal cost and any other related fees like site inspection etc.
Remember to review your loan disclosure documents with your broker in detail. If there is anything you don’t understand, ask your broker, notary or lawyer to explain.