Private Mortgage Rules in Ontario: What Every Borrower Should Know (2026)

Last updated: September 2026

Private mortgages are fully legal in Ontario — but they operate under a specific set of rules that most borrowers never hear about until they are sitting at a lawyer’s office. The short version: private lending in Ontario is regulated by the Financial Services Regulatory Authority of Ontario (FSRA) under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA). A licensed brokerage must be involved in the deal, all fees must be disclosed to you in writing before you sign, the mortgage must be suitable for your situation, and there are legal caps on how much interest and fees you can be charged. This guide walks through each of those rules in plain language.

Who regulates private mortgages in Ontario?

Unlike banks, which answer to the federal Office of the Superintendent of Financial Institutions (OSFI), private mortgage lending in Ontario is a provincial matter. FSRA licenses and oversees mortgage brokerages, brokers, agents and administrators under the MBLAA. That licensing system is the backbone of borrower protection in the private space: FSRA does not regulate a private lender’s underwriting or how it prices risk, but it does regulate the licensed brokerage that arranges the deal — and Ontario rules require a licensed brokerage to be in the middle of every private mortgage transaction.

Rule 1: A licensed brokerage must be involved

This is the rule that surprises people most. An individual private lender does not need their own FSRA licence to lend their own money — but only if the deal goes through a licensed mortgage brokerage (FSRA’s published licensing guidance states this directly). A private lender who is “doing business as a mortgage lender” — advertising, soliciting borrowers, originating loans directly — must be licensed as a brokerage itself.

What this means for you as a borrower: any legitimate private mortgage offer in Ontario should come to you through a licensed brokerage, broker or agent. You can verify anyone’s licence on the public registry at fsrao.ca. If someone offers you a private mortgage directly, with no licensed brokerage in the picture, walk away — the transaction is operating outside the rules, and you have none of the protections described below.

One detail worth knowing: since April 1, 2023, Ontario mortgage agents hold either a Level 1 or Level 2 licence. Only Level 2 agents are authorized to deal with private lenders and mortgage investment corporations, so the person handling your file needs the right licence class too.

Rule 2: All fees and the true cost of borrowing must be disclosed in writing

Ontario’s mortgage regulations (O. Reg. 188/08 under the MBLAA) require brokerages to disclose fees to borrowers in writing — and that disclosure has to cover the full picture: the interest rate, the lender fee, the broker fee, legal and appraisal costs, and what a renewal would cost if you needed one. Nothing material can be left to a verbal promise.

In practice, the typical fee stack on a private deal looks like this:

• Lender fee. The lender charges a fee for advancing the funds, usually deducted from the mortgage advance on closing — not paid out of your pocket up front.
• Broker fee. The broker who sources and structures a private deal charges for that work. Ask exactly what it covers.
• Legal and appraisal costs. A real estate lawyer registers the mortgage on title, and an appraisal confirms the property value the lender is relying on.

Because these costs sit on top of the interest rate, always ask for the total cost of borrowing expressed as an annualized figure — the number you can actually compare. A written breakdown before you sign is not a courtesy; it is a regulatory expectation. For a deeper look at how private pricing works, see my guide to private mortgage rates in Ontario.

Rule 3: The mortgage must be suitable for you

Under section 24 of the MBLAA, licensees who arrange private mortgages must take reasonable steps to ensure the transaction is suitable for both the borrower and the private lender. FSRA has reinforced this with dedicated guidance on mortgage product suitability. In plain terms: the broker arranging your deal cannot just place you with whoever will fund it. They have to consider whether the term, the payments, the fees and the exit actually fit your circumstances.

This is the rule that separates a good broker from a paper-pusher. A suitable private mortgage has a realistic exit plan built in from day one — refinancing to a bank when your credit recovers, selling the property, or a credible backup plan if the first exit does not materialize. If nobody has walked you through how this loan ends before you sign, the suitability box has not been ticked. I explain the full mechanics of structuring these deals on my private mortgages page.

Rule 4: There are legal limits on interest and fees

Canada’s Criminal Code (section 347) makes it an offence to charge interest at a “criminal rate” — and since January 1, 2025, that cap is lower than it used to be. Under the amended rules (introduced through the Budget Implementation Act, 2023), the criminal rate for consumer lending is now 35% APR, down from the old 60% effective annual rate. Critically, “interest” under the Criminal Code is defined broadly: it includes all fees, commissions, penalties and charges connected to the loan, not just the stated rate. A modest-sounding rate with heavy upfront fees on a short term can cross the line — the law annualizes the total cost.

There are carve-outs for commercial lending: commercial loans between $10,000 and $500,000 are capped at 48% APR, and commercial loans above $500,000 have no cap. But for a homeowner borrowing against a principal residence, the 35% APR ceiling is the number that matters.

Legitimate Ontario private mortgages sit far below these limits — the criminal-rate rules exist to draw a hard line against predatory lending, not to describe normal private pricing. Still, the breadth of the definition is worth knowing: if a deal’s all-in annualized cost looks aggressive, ask your lawyer to run the math before you sign.

Rule 5: The mortgage must be registered on title

A private mortgage is not a handshake loan. Like any mortgage in Ontario, it is registered as a charge against your property in the provincial land registration system, and a real estate lawyer handles the registration and the flow of funds on closing. Registration is what gives the lender its security — and it is what gives you a legally enforceable, documented obligation with defined terms, rather than an informal arrangement.

This is also why private deals need a few days, not a few hours, to close: title searches, mortgage instructions, and fund transfers all run through the lawyer. Anyone promising same-day private funding without legal involvement is not describing a real mortgage.

Common practices that are not official rules — but you should know anyway

Beyond the legal requirements, the private market has settled conventions. These are not statutes, but they shape every deal:

• Short terms. Most private mortgages run one to three years. They are bridge financing, designed to get you from a problem to a solution — not a permanent home. Borrowers with bruised credit often use the term to rebuild and refinance out; see how private mortgages work for bad-credit borrowers.
• Interest-only payments are common. Many private deals carry interest-only payments to keep the monthly carrying cost manageable during the bridge period.
• Equity is the underwriting. Private lenders approve primarily on the property’s value relative to the loan — the loan-to-value ratio — rather than on credit scores and T4 income. That is exactly why second mortgages for debt consolidation work through the private channel when banks say no.
• Renewals mean new fees. If you cannot exit at the end of the term, renewing a private mortgage typically triggers fresh lender and broker fees. Build this possibility into your math from the start.

How to check a private lender is legitimate

Before you sign anything, run these checks:

1. Confirm the brokerage’s licence on FSRA’s public registry at fsrao.ca. Confirm the agent handling your file holds a Level 2 licence if private lenders are involved.
2. Insist on written disclosure of every fee and the total annualized cost of borrowing before you commit.
3. Have your own lawyer review the commitment. The lender’s lawyer acts for the lender. Independent legal advice is inexpensive protection.
4. Never pay large upfront fees to secure a private mortgage. Legitimate fees are deducted from the advance at closing, not wired in advance.
5. Ask about the exit plan in writing. If the broker cannot describe how this loan ends, the suitability rule is not being met.

Private mortgage rules: quick answers

Are private mortgages legal in Ontario? Yes. They are legal and regulated by FSRA under the Mortgage Brokerages, Lenders and Administrators Act, 2006, provided a licensed brokerage is involved in arranging the deal.

Does a private lender need a licence in Ontario? An individual lending their own money does not need their own licence if the mortgage is arranged through a licensed mortgage brokerage. Anyone operating as a mortgage lending business must be licensed.

What is the maximum interest rate on a private mortgage in Ontario? The Criminal Code caps the all-in cost of consumer credit at 35% APR (fees included) for loans made on or after January 1, 2025. Legitimate private mortgages are priced far below this ceiling.

How long do private mortgages last? Typically one to three years. They are structured as bridge financing with a defined exit plan, such as refinancing to a bank or selling the property.

Talk to a licensed Ontario broker before you sign

Private mortgages solve real problems — bruised credit, self-employment income banks cannot paper, tight timelines, properties banks will not touch — but only when the rules above are followed and the exit plan is real. If you are considering a private mortgage in Ontario, get in touch and I will walk you through whether it fits your situation, what it will actually cost, and how you get out of it.