How to Explain Private Mortgage Costs to a Hesitant Client: A Broker's Guide

Why the rate conversation fails and the dollar conversation works

A client sitting at 4.5 percent on their first mortgage hears "11.5 percent" and does the only math that comes naturally: that is more than double. The anchor is legitimate. The Bank of Canada held its policy rate at 2.25 percent on September 2, 2026, bank pricing remains the cheapest money in the market, and your client knows it. So do not argue that a private rate is "actually reasonable" against bank money. It is reasonable only against the alternative in front of this specific client, and that is the comparison that matters.

The reframe is simple. An annualized rate on a 12 month interest-only loan is a fee for solving a problem for one year. On a $60,000 second at 11.5 percent, the interest is $575 a month. Most clients who flinch at "11.5 percent" do not flinch at "$575 a month for a year while we fix this." Same number, honest framing, different conversation.

The working rule from the underwriting side: never present the rate before you have presented the total dollar cost over the term, and never present the total dollar cost of the loan before you have quantified the cost of the alternative. Rate, in isolation, is the least informative number on the page.

The full cost of a one year private second, in dollars

Before the meeting, total the column. A client who discovers a fee at commitment stage becomes a client who distrusts every number you gave them earlier. A typical one year private second in Ontario carries five cost components:

• Interest. Seconds price above firsts because the second lender stands behind the first charge. Where a private first might sit in the high single digits, seconds in the GTA commonly run higher; pull current context from our summary of private mortgage rate ranges in Ontario before you quote a range.
• Lender fee. Commonly 1 to 4 percent of the principal, deducted from the advance.
• Broker fee. Commonly 1 to 2 percent on private deals. Disclose it early and in writing.
• Legal costs. The borrower typically pays both their own counsel and the lender's counsel. Budget in the low thousands combined.
• Appraisal. A few hundred dollars, and non-negotiable on a private deal.

Two practices separate professionals from order-takers here. First, present the number net of fees: if the client needs $60,000 in their hands, the loan amount has to account for the fees coming off the top. Second, walk the client through what appears in the commitment letter, including fees and conditions, before they see it from a lawyer. Nothing in that document should be new to them.

The other column: what doing nothing costs in Ontario

This is the column most brokers never build, and it is the one that moves hesitant clients, because it replaces a vague fear (expensive loan) with a specific one (what is already happening). The distress behind these files is not hypothetical: CMHC, using Equifax data, reported that the number of GTA mortgage holders in arrears more than quadrupled in three years, from 662 in Q3 2022 to 2,797 in Q3 2025. Behind each of those files is a homeowner running the "maybe it resolves itself" strategy. Walk the client through what the do-nothing path looks like for their situation:

The arrears path. Missed payments trigger administration and NSF charges, and interest keeps accruing on the arrears. In Ontario, a lender can issue a notice of sale as early as 15 days after default, the notice gives a redemption window of at least 45 days, and enforcement generally cannot conclude in the first three months of default. That sounds like time. It is not. Every week inside that window, the lender's enforcement legal costs are being added to the debt, and those costs come out of the client's equity, not the lender's pocket. We cover the mechanics in detail in our broker guide to arrears and power of sale files.

The forced sale path. If it gets to a sale under power of sale, the lender must seek market value, but the sale happens on the lender's timeline, as-is, with legal costs and commission deducted from proceeds. The homeowner loses control of timing, presentation, and negotiation, which in practice is where sale price is made or lost. Whatever equity survives comes back to the client only after every enforcement cost is paid.

The lost deposit path. For purchase files, the do-nothing cost is cleaner and uglier: a buyer who cannot close forfeits the deposit and can be sued for damages if the property resells lower. On a GTA purchase, deposits of five percent of the price are routine. A client hesitating over a five-figure loan cost while a five-figure deposit sits at risk has not seen both columns yet. That is your job.

A hypothetical cost comparison you can put in front of the client

This is a hypothetical example with assumed figures, for illustration only. It is not a quote, and every number should be replaced with the real figures from your file.

Suppose a broker has a client with an $850,000 GTA home, a $520,000 first mortgage, and four months of arrears after a layoff. The client is re-employed but the bank will not touch the file until the arrears are cured and the credit recovers. The proposal: a $60,000 one year interest-only private second at an assumed 11.5 percent, used to cure the arrears, cover the fees, and clear two small consumer debts.

Even if you strike the softest assumption (the below-market outcome) entirely, the do-nothing column still runs several times the cost of the loan, and it ends with the client losing the house and their say in how it sells. The private second column ends with the client owning the home, bank-ready, twelve months later. Present it exactly that way: this is not cheap money against expensive money, it is a known five-figure cost against an open-ended one. For structure and positioning questions on the second charge itself, our overview of how second mortgages work in Ontario covers the fundamentals.

Set the exit expectation before they sign, not at month 10

A private mortgage without an exit plan is not a bridge, it is a plank. The exit conversation belongs in the first meeting: it is central to suitability, and it converts the scariest feature of the product (the 12 month term) into its main selling point: this loan is designed to end.

Name the exit in writing. There are only a few honest ones: refinance to an A or B lender once the credit event ages or income documentation matures, sale of the property on the client's own timeline, or a known liquidity event with a date attached. "Rates will probably come down" is not an exit plan, and "we will renew" is a contingency, not a strategy.

Then put milestones on it. If the exit is a bank refinance, the client should know which months the arrears must stay cured, when the credit score needs to cross the threshold, and that you will run the refinance file at month nine, not month twelve. A client who knows the plan works the plan.

Disclosure talking points that build trust and protect your licence

Full disclosure is not the part of the meeting to rush through. It is the part that closes the deal, because a hesitant client is really asking one question: can I trust this person. The regulator has made the stakes explicit. FSRA's examinations of private mortgage recommendations found that 65 percent of reviewed transactions had missing, incomplete, or inconsistent suitability documentation, and roughly half lacked specific cost disclosure, with borrowers pointed at documents instead of walked through them. Do not be in that half. It is bad compliance and worse salesmanship.

The talk track that satisfies both the client and the file:

• Walk the cost of borrowing line by line. Every fee, who receives it, and the net advance after deductions. Say your own fee out loud, first.
• Disclose conflicts at the earliest opportunity. Any relationship with the lender gets named before the client hears the proposal, not at signing.
• Document suitability like you will have to defend it, because you might: why this product, why this amount, why this term, and what the exit is. Our summary of FSRA's private mortgage rules for brokers breaks down what the file should contain.
• Give them the two-column comparison in writing. The same hypothetical-style table above, populated with their real numbers, is both the best sales document and the best suitability evidence you can generate.

The five objections every client raises, and the answers that work

"That rate is double what my bank charges"

Agree with them, then change the unit. "You are right, and if the bank would do this deal, we would be at the bank. They will not, so the real comparison is this loan against what happens without it." Then show the two columns in dollars. The rate objection almost never survives contact with the do-nothing column. If it does, and the client genuinely has a cheaper viable option, send them to it. Deals you talk people into come back to you.

"The fees feel excessive"

Do not defend fees in the abstract. Itemize them: who receives each one, what it pays for, and the total in dollars next to the cost of the problem. On a $60,000 second, roughly $4,300 in all-in fees is the cost of setting up secured financing no institutional lender would provide. Clients accept fees they can see and allocate; they reject fees that arrive as a lump at commitment.

"Why only one year?"

Because it should not last longer. The term matches the plan: the loan exists to fix a specific problem, and the exit is designed before funding. A longer term at private pricing is not a favour to the borrower. If the situation genuinely needs two years, structure that honestly, but most files call for a short term with a written exit path.

"Why not just wait for the bank?"

Sometimes that is the right answer, and saying so builds more credibility than any close. But waiting is only free when nothing is deteriorating. If arrears are accruing, enforcement is running, or a deposit is at risk, waiting has a monthly price. Put a number on it: "Every month we wait costs roughly X in penalties and interest, and the bank's answer does not change until the arrears are cured." Waiting is a strategy with a cost, so it deserves a line in the ledger like everything else.

"What if I cannot get out at the end of the term?"

The honest answer: it is a real risk, and it is exactly why the exit plan is built before funding, with a checkpoint at month nine. If the exit slips, options exist (renewal, extension, or a managed sale on the client's timeline rather than the lender's), but none of them are the plan. A broker who names this risk unprompted, and shows the mitigation, closes more hesitant clients than one who waves it away. If a file has no plausible exit at all, the answer is not better framing. The answer is that the deal should not be done.

FAQ

What should a broker show a client first: the rate or the total cost?

Total cost, in dollars, over the actual term, and alongside the quantified cost of doing nothing. The rate on its own invites a comparison to bank pricing that the private product is not competing with. Rate comes last, as one input to the dollar figure.

How much does a one year private second mortgage cost in Ontario?

As a structure, expect interest above private first mortgage pricing, plus a lender fee of roughly 1 to 4 percent, a broker fee of roughly 1 to 2 percent, legal costs for both sides, and an appraisal. On a $60,000 second, all-in costs commonly land in five figures for the year. Exact pricing depends on LTV, position, property, and story.

What does a power of sale cost a homeowner in Ontario?

Far more than the sticker items suggest. Enforcement legal costs and sale commissions are deducted from the homeowner's equity, arrears interest and admin charges accrue throughout, and the sale happens on the lender's timeline rather than the owner's. The process can begin with a notice of sale as early as 15 days after default, with a minimum 45 day redemption window.

What does FSRA expect brokers to document on a private mortgage?

Evidence of a suitability assessment (why this product, amount, term, and lender for this client), complete cost of borrowing disclosure walked through with the borrower, early written disclosure of any conflicts of interest, identity verification, and the exit strategy. FSRA's exam findings show most files it reviewed fell short on suitability documentation.

What is a realistic exit plan for a one year private mortgage?

One of three things: a refinance to an A or B lender tied to specific milestones (arrears cured, credit recovered, income documented), a sale on the client's own timeline, or a dated liquidity event. A realistic plan names the exit, sets the milestones, and gets tested around month nine, leaving time to adjust before maturity.

When the client says yes: where to send the file

The cost conversation wins the client. The lender you place the file with determines whether everything you promised survives underwriting. A committee that retrades terms, or a syndicate that goes quiet for two weeks, undoes the trust you just built.

Richview Capital is a direct mortgage investment corporation, licensed in Ontario (MIC #13171), lending in Toronto, the GTA, and across Ontario through the broker channel. Direct means the underwriting happens in-house: the people reviewing your file are the people funding it, so you get answers from a decision-maker, terms that match the commitment, and a lender who expects the exit plan conversation because it underwrites to one.

If you have a file where the math in this article is the conversation you need to have, connect with our team through the brokers page and walk us through the deal. Your client stays yours. We just fund the fix.

• Private Mortgage Ontario
• Mortgage Brokers Ontario
• Richview Capital Brokers
• GTA Private Lending

Richview Capital MIC is a licensed Mortgage Investment Corporation (Mortgage Administrator License #13171). This article is educational information for Ontario mortgage brokers — not legal, financial, or tax advice. See About and Disclaimer.