When arranging a private mortgage on a residential property in Ontario, you can expect several types of fees. Here are some common ones:
Lender Fees
These can include application fees, underwriting fees, and any fees specific to the lender. Fees generally range from 1-3% of the mortgage amount, depending on the complexity and risk involved in the transaction. For lower risk mortgages there may be no lender fees.
Legal Fees
In a private mortgage transaction, there will be two lawyers involved. One will represent the interest of the lender, and one will represent your interests. You will be responsible for the lender’s legal fees and your own legal fees. Legal fees will vary based on the complexity of the transaction.
Appraisal Fees
The lender will require an independent appraisal of the property to determine its current value. Appraisal fees will vary based on the location and uniqueness of the property. Residential appraisals are generally in the $500 to $1500 range for private mortgages.
Brokerage Fees
If you use a mortgage broker to help arrange your private mortgage, they will charge a fee for their services. Typical brokerage fees range from 1-2% of the mortgage amount. Generally, fees are higher for more complicated transactions while simple transactions are less expensive.
Prepayment Penalties
If you pay off the mortgage early, there may be penalties involved. Be sure to read your Commitment and understand what these costs will be prior to completing the transaction.
Conclusion
It’s important to discuss these fees with your lender or broker to understand the total costs involved and to ensure you’re clear on what to expect throughout the process. All costs of arranging the mortgage should be disclosed to you prior to signing a mortgage commitment.
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