Private Mortgage Commitment Letter Fees and Conditions: An Ontario Broker's Guide

This guide walks through a private lender's commitment the way an underwriter reads one: the fee stack, the holdbacks, the funding conditions, the renewal and default terms, and the red flags that should send you back to the lender before your client signs. If you want borrower-facing numbers instead, we cover current private mortgage rates and fees for Ontario borrowers in a separate guide.

Why the Commitment Letter Is the Broker's Document to Defend

Private lending is not a side business anymore. FSRA's 2025-26 mortgage brokering supervision plan reports that private mortgages made up 15.8 percent of Ontario's brokered transactions by count in 2024, and it names private mortgage suitability, exit strategies, and APR accuracy as active examination areas.

The examination results should sharpen your attention. When FSRA reviewed 101 private mortgage transactions, roughly 65 percent had missing, incomplete, or inconsistent suitability documentation, and almost half of the disclosure documents did not spell out the loan's costs and terms at all; they simply said "see commitment."

"See commitment" is not disclosure. If the commitment letter is carrying the disclosure load, every fee, holdback, and condition inside it has to be accurate, complete, and explained to the client in plain language. FSRA's guidance is also clear that borrowers get at least two business days to review disclosure before signing. A deal timeline with no room for that window is a problem to solve, not a formality to skip.

The Fee Stack: Reading Every Dollar Before the Client Signs

Every commitment has its own fee vocabulary. Your job is to build two numbers from it: what the client actually receives on closing, and what the loan actually costs per year.

Lender fee

The lender fee is the lender's compensation for underwriting and funding, typically a percentage of the loan amount deducted from the advance. In the Ontario private market it commonly runs from about 1 to 4 percent depending on position, loan-to-value, property type, and term. Check three things: the exact figure, whether it is deducted from the advance or payable separately, and when it is earned. A fee earned "upon acceptance" can be owed even if the loan never funds.

Broker fee

Your own fee usually appears in the commitment or an accompanying schedule, and it must match your disclosure documents exactly. A mismatch between the two is one of the fastest ways to turn a routine file review into a compliance finding. If a referral or co-brokering split exists, confirm how it is papered.

Legal, administration, and third-party fees

Private deals carry two sets of legal fees: the borrower's own lawyer and the lender's counsel, whose account the borrower typically also pays. Look for administration, setup, and wire fees, and for any reference to a separate fee schedule "as amended from time to time." Get the current version and put it in the file, because discharge and statement fees live there, and your client will meet them at exit.

Commitment, standby, and deposit fees

Some lenders require a deposit or commitment fee on acceptance, credited toward closing costs if the deal funds. Read the refund language word by word. "Non-refundable if the borrower fails to close" is common and defensible. "Non-refundable under any circumstances," even if the lender declines to fund, is not paper you want your client on.

A worked example

Suppose a broker has a client with a $1.2 million detached home in Scarborough, a $600,000 bank first mortgage, and a need for $300,000 to clear CRA arrears and complete a renovation. A one-year, interest-only private second at a hypothetical 10.49 percent arrives with this fee structure:

The client borrows $300,000, pays interest on $300,000, and receives about $278,600. That gap, a bit over 7 percent of the loan, is the number the client needs to hear from you before signing, not from the lawyer at closing.

Holdbacks: Where the Net Advance Quietly Shrinks

Holdbacks are the least understood section of most commitments, and they move real money.

Interest holdbacks. Many private loans are structured with no monthly payments, with some or all of the term's interest held back from the advance instead. That helps a client with damaged cash flow, but the client pays interest on the full face amount, including the portion the lender kept. A twelve-month full interest holdback on the example above would remove roughly $31,500 from the advance. Confirm whether unused holdback is refundable on early repayment.

Renovation and construction holdbacks. Funds for improvements are typically advanced in draws against inspections, similar to how private construction loan draws and holdbacks work on ground-up projects. Check who orders and pays for inspections, how long draws take, and whether interest accrues on the full commitment or only on advanced funds; interest on money the client has not yet received raises the true cost well above the note rate.

Tax and arrears holdbacks. If the deal exists to cure property tax or CRA arrears, the lender will often pay those creditors directly from the advance. Good discipline, but confirm the payout figures are current; stale arrears numbers are a common source of closing-day shortfalls.

Conditions Precedent: What Can Still Kill or Reprice the Deal

A commitment is an offer to lend if conditions are met, not a guarantee of funds. Read the conditions section asking one question: which of these could still change the deal?

• Appraisal. Is the commitment based on a completed appraisal or subject to one? If the lender requires its own approved appraiser, a broker-ordered value may not survive, and a lower appraisal usually reprices the deal or cuts the advance.
• Title and priority. Expect a required position, no undisclosed encumbrances, and often a no-secondary-financing covenant. If your client plans to register anything behind this loan later, that needs consent language now.
• Status of the first mortgage. For seconds, expect a condition that the first is current, with proof.
• Insurance. Full replacement coverage with the lender as loss payee, in place before funding.
• Exit strategy documentation. FSRA has flagged exit strategies as an examination focus, and stronger lenders now ask for the exit in writing: the sale plan, the refinance path, or the maturity event that repays the loan. A complete package up front, as covered in our private mortgage deal submission guide, is the difference between conditions that clear in days and conditions that drag past expiry.
• Material change and expiry. Note the commitment's expiry date and any clause letting the lender revisit terms on a material adverse change. Both are standard; both matter when a closing slips.

Term, Renewal, and What Happens When the Exit Slips

Most private mortgages in Ontario run six to twelve months, and plenty renew at least once, so read the renewal language as carefully as the funding terms.

Look for the renewal fee first. One to 2 percent per renewal is common in the market; anything materially above that compounds quickly on a file that renews twice. Then look for automatic renewal clauses that roll the loan, and the fee, unless notice is given by a set date. Diarize that date the day the loan funds. Check whether the rate resets at renewal, and check the prepayment terms: notice requirements, statement fees, and any minimum-interest charge, such as three months of interest on early repayment of a closed term.

Renewal terms are negotiable before signing and rarely negotiable at month eleven. With the Bank of Canada holding its policy rate at 2.25 percent through mid-2026, refinance exits back to institutional lenders are realistic for many private borrowers, but timelines slip, and a fair renewal clause is the client's insurance policy. For files where the private loan bridges behind a bank first, the mechanics we outline on structuring a second mortgage in Ontario apply directly.

Default Terms: Price the Downside Before It Happens

Nobody plans to default, which is exactly why the default section gets skimmed. Read it, and price it.

Expect per-item NSF charges, administration fees for default management, and full recovery of the lender's enforcement legal costs. Those are normal. What is not enforceable is a rate that increases on default: section 8 of the federal Interest Act prohibits any fine, penalty, or rate of interest that charges more on mortgage arrears than on principal not in arrears. A commitment that jumps the rate on default is a red flag about the drafting quality of everything else in the document.

Also scan for cross-default clauses (default under the first mortgage triggering default here is standard; default under any other obligation is broader) and for the enforcement route. In Ontario that is usually power of sale, which moves quickly once notice periods run. Your client should understand that a private lender's timeline from missed payment to enforcement is shorter than a bank's.

The 35 Percent Line: Fees, Short Terms, and the Criminal APR

Since January 1, 2025, Canada's criminal interest rate has been 35 percent APR under section 347 of the Criminal Code, and the calculation captures far more than the note rate: most fees, commissions, and charges connected to the credit count toward it.

Short terms are where the trap lies. Spread over twelve months, 4 points of combined fees add roughly 4 percentage points to the effective annual rate; the same 4 points on a six-month term add roughly 8. On a three-month bridge at a 12 percent note rate, about 5 points of fees puts the annualized cost in the low thirties, and a point or two more crosses the line. FSRA has named APR accuracy an examination area for exactly this reason. When a fee-heavy commitment arrives on a short term, run the APR before your client signs, and keep the calculation in the file.

Red Flags: A Broker's Pre-Signature Checklist

Before the client signs, confirm you can answer yes to every line:

1. Every fee is an exact dollar amount or percentage, and any referenced fee schedule is obtained and filed.
2. You know when the lender fee and any deposit are earned, and what happens if the loan does not fund.
3. The broker fee in the commitment matches your disclosure documents exactly.
4. The net advance is calculated, written down, and explained to the client.
5. Holdback amounts, release conditions, and refund treatment on early repayment are clear.
6. Interest accrues only on advanced funds, or the client accepts otherwise.
7. Conditions precedent are achievable before the commitment expires, and the appraisal risk is understood.
8. The exit strategy is documented in the file, not just discussed.
9. Renewal fee, notice dates, and any automatic renewal or rate reset are identified and diarized.
10. Prepayment terms are clear, including any minimum interest on early discharge.
11. No default clause raises the interest rate on arrears, and default fees are itemized.
12. The all-in APR, fees included, sits clearly below 35 percent, and the client received disclosure at least two business days before signing.

Comparing Commitments: Rate Is Not the Price

When two or three commitments compete for the same file, the lowest note rate wins the client's attention and often loses the actual comparison. A 9.75 percent commitment with 4.5 points of fees and a 2 percent renewal fee routinely costs more than a 10.49 percent commitment with 2 points and a modest renewal fee. Build the twelve-month all-in cost of each commitment and compare those numbers.

The counterparty matters as much as the paper. A direct lender such as a mortgage investment corporation underwrites with its own capital, so the person who issued the commitment can actually discuss amending a condition, and renewal decisions sit with the shop that funded the loan. Syndicated or brokered-out paper adds a layer between you and the decision, which can show up as rigid conditions, slower amendments, and surprises at renewal. Know which structure you are recommending, and make sure your client does too.

FAQ

Is a private mortgage commitment letter legally binding in Ontario?

Once accepted, a commitment is a contract, but almost every private commitment is conditional on items like appraisal, title, and insurance, so the lender's obligation to fund only crystallizes when conditions are met. Some obligations, such as a fee earned on acceptance, can bind the borrower even if the loan never funds.

When is the lender fee earned, and can a client lose a deposit if the deal does not close?

It depends entirely on the commitment's wording. Fees earned "upon acceptance" or "upon issuance of this commitment" can be payable even without funding, while fees earned on advance are only owed if money moves. Deposits are commonly non-refundable if the borrower walks away, but should be refundable if the lender declines to fund.

How long before signing must a broker provide disclosure in Ontario?

FSRA guidance provides that borrowers are entitled to at least two business days to review the mortgage disclosure statement before signing. Writing "see commitment" on the disclosure form does not satisfy the requirement; the costs, terms, risks, and any conflicts of interest must be specifically disclosed.

Do lender and broker fees count toward the 35 percent criminal interest rate cap?

Yes, in general. The criminal rate under section 347 of the Criminal Code is calculated on an APR basis that includes most fees, commissions, and charges connected to the loan, not just the note rate. Fee-heavy commitments on short terms are the highest-risk combination, so run the annualized calculation on every short-term deal.

Can a private lender raise the interest rate if the borrower defaults?

No. Section 8 of the federal Interest Act prohibits charging a higher rate on arrears than on money not in arrears for mortgages on real property. Lenders can charge reasonable administration and enforcement costs, but a default rate escalation clause in a commitment is unenforceable and a sign of careless drafting.

Send Your Next File to a Lender Whose Commitments Read Clean

Everything in this guide gets easier when the lender on the other side writes commitments the way you wish every lender would: fees stated in dollars, holdbacks explained, conditions discussed with you before the paper is issued. Richview Capital is a licensed Ontario mortgage investment corporation (MIC #13171) that lends its own capital with in-house underwriting and works through the broker channel across Toronto, the GTA, and Ontario.

Because underwriting happens in-house, the person who structures your deal is the person you call about a condition, a holdback, or a renewal, and you deal with one lender from commitment through discharge. Brokers keep their clients; our job is to make you look good in front of yours.

If you have a file that fits, or you want to see how our commitments are structured before you send one, connect with our team through the Richview Capital brokers page and start the conversation.

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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.