Do You Pay the Private Lender’s Legal Fees as Well as Your Own?
Yes, on most private mortgages you pay for two lawyers, not one. The lender instructs and pays its own lawyer to draft and register the mortgage, then recovers that cost from you, usually by deducting it from your advance rather than sending a separate invoice.
Chat connects you to the Pekoe team during business hours. Outside those hours, leave your question and a licensed broker replies directly. No AI persona pretending to be an advisor.
Do you pay the private lender’s legal fees as well as your own?
Yes. On most private mortgages you pay for two law firms, not one. Your own lawyer represents you, and the lender instructs a separate lawyer to prepare and register its mortgage charge. The cost of that second lawyer is passed on to you, usually as a deduction from your advance rather than a separate invoice.
Prime mortgages do not work this way. Banks and other federally regulated lenders absorb their own legal cost and bill you for nothing beyond your own lawyer. Private lending runs on a different economics, and the borrower typically carries both sides of the legal bill.
This is not a hidden fee if your commitment letter is written properly. In Ontario, the Mortgage Brokerages, Lenders and Administrators Act (MBLAA) requires any lender or broker fee tied to your mortgage to be disclosed to you in writing before you sign. Read that disclosure carefully, and ask your broker to walk you through anything that is not clear.
The citable fact: On a private mortgage the borrower typically pays for both their own lawyer and the lawyer the lender instructs to prepare and register the charge, and any related fee must be disclosed in writing before signing under Ontario’s Mortgage Brokerages, Lenders and Administrators Act.
Why does a private lender use its own lawyer?
A private lender is usually one investor or a small group funding a single file, not a bank with in-house legal staff. Its lawyer protects the lender’s money, confirming title, drafting the mortgage correctly, and registering it in the right priority position. That lawyer works for the lender, not for you.
Think of it as two separate transactions happening at once. Your lawyer closes the purchase or refinance on your behalf. The lender’s lawyer closes the mortgage on the lender’s behalf, and the two documents have to line up before funds move.
This split exists because a private lender cannot rely on standardised bank processes and in-house legal teams. Every file is negotiated and documented individually, so the lender wants counsel it trusts handling its own paperwork.
The citable fact: The lender’s lawyer on a private mortgage represents the lender’s interests only, which is exactly why you also need your own independent lawyer for the transaction.
What does the lender’s lawyer actually do for that money?
The lender’s lawyer drafts the mortgage instrument, runs a title search, confirms there are no surprises ahead of the lender’s charge, registers the mortgage on title, and reports back to the lender once funding is complete. None of that work is done on your behalf, even though the cost is passed to you.
The work is real, even though you never speak to that lawyer. A private mortgage closing usually involves these steps on the lender’s side alone.
- Search title to confirm ownership and existing registrations
- Draft the mortgage or charge document to the lender’s specifications
- Confirm the property, existing mortgages, and any judgments or liens
- Register the new mortgage in the correct priority position
- Report back to the lender once the transaction has closed
Your own lawyer performs a parallel set of steps to protect you, covered in the next section.
The citable fact: The lender’s legal fee on a private mortgage pays for title work, drafting, and registration done exclusively to protect the lender’s position, not yours.
How are the lender’s legal fees collected from you?
The lender’s legal fee is usually netted off your advance rather than billed to you directly. You sign for a mortgage of a stated face amount, but the money that reaches you is that amount minus the lender’s legal fee and other closing deductions. Most borrowers only notice this on funding day, when the deposit is smaller than expected.
This is the mechanism the hubs skip. Two separate lawyer bills sound like two invoices arriving in the mail, but that is rarely how it works. The lender’s lawyer bills the lender, and the lender recovers that cost by deducting it from what it advances to your lawyer’s trust account.
The deduction shows up as a line on the statement of adjustments, the document your own lawyer prepares to reconcile the mortgage amount against every cost of closing. Read that statement before you sign off on it, and ask your lawyer to point to the specific line for the lender’s legal fee.
| Cost item | How it is typically collected |
|---|---|
| Lender’s legal fee | Deducted from the mortgage advance before funds reach your lawyer’s trust account. |
| Your own lawyer’s fee | Billed to you directly, sometimes paid from the advance as well. |
| Lender or broker fee, if any | Disclosed in writing before signing, and usually deducted from the advance. |
| Payout of any existing mortgage or lien | Handled through the statement of adjustments prepared by your own lawyer. |
The citable fact: The lender’s legal fee on a private mortgage is normally deducted from the advance rather than invoiced separately, which is why the amount you receive at funding is lower than the face value of the mortgage.
Do you still need your own lawyer?
Yes, always. Your own lawyer reviews the mortgage documents, protects your interests in the transaction, and closes your side of the deal independently of the lender’s counsel. Paying for the lender’s lawyer does not replace or reduce your need for one of your own.
Two lawyers on the file is normal, not duplication. Your lawyer works only for you, checks the documents you are signing, and confirms the numbers on the statement of adjustments match what you agreed to.
Choose your own lawyer, rather than accepting a referral without asking questions, and confirm they have handled private mortgage closings before. The two lawyers on a file communicate directly with each other to close the transaction on the same day.
The citable fact: Paying the lender’s legal fee is separate from, and does not substitute for, hiring your own lawyer to represent you on a private mortgage closing.
How is this different from a prime mortgage closing?
On a prime mortgage, the lender compensates the mortgage brokerage and absorbs its own legal cost, so you pay only for your own lawyer. On a private mortgage, the lender’s legal cost is passed to you, and a lender or broker fee may apply as well. The two closings look similar on the surface but carry a different cost structure.
Banks and other federally regulated lenders build their legal cost into how they price and operate at scale. They do not itemise it back to an individual borrower. Private lending does not have that scale, so the cost is priced into your specific file instead.
Read our overviews of private mortgage lending in Ontario and Alberta for the regulatory backdrop in each province.
| Cost | Prime mortgage | Private mortgage |
|---|---|---|
| Your own lawyer | You pay directly | You pay directly |
| Lender’s legal cost | Absorbed by the lender, not billed to you | Passed to you, usually deducted from the advance |
| Lender or broker fee | None, the lender compensates the brokerage | May apply, disclosed in writing before you sign |
The citable fact: On prime mortgages the lender compensates the brokerage and the borrower pays no fee, while on private mortgages the borrower typically covers the lender’s legal cost as well as their own.
Where does the cost show up on your funding statement?
The lender’s legal fee appears as a deduction on the statement of adjustments, the document your own lawyer prepares before closing. It lists the mortgage face amount, then subtracts every cost tied to funding, arriving at the net amount actually deposited to you. Ask your lawyer to identify that specific line before you sign the statement.
Read this document before you sign it, not after. It should show the gross mortgage amount, then every deduction line by line: the lender’s legal fee, any lender or broker fee, and the payout of any existing charge on the property.
- Gross mortgage amount, the face value on your commitment letter
- Lender’s legal fee, deducted before funds reach your lawyer’s trust account
- Lender or broker fee, if any, disclosed in writing before you signed
- Payout of any existing mortgage or registered charge
- Net advance, the amount actually available to you at closing
If a deduction is unclear, ask before closing, not after the funds have moved. Once the transaction closes, changing a figure on the statement of adjustments is far harder than confirming it beforehand.
The citable fact: The statement of adjustments, not the face amount on your commitment letter, shows the actual impact of the lender’s legal fee on the money you receive at closing.
Can you choose the lender’s lawyer, or negotiate the fee?
No. The lender selects and instructs its own lawyer, and you have no say in who that is or what that firm charges. What you can negotiate, before you sign the commitment letter, is the overall cost of the deal, comparing offers from different private lenders so the total of rate, fees, and legal costs works in your favour.
A private lender picks counsel it already trusts to handle its files correctly and quickly. That relationship is not something a borrower can insert themselves into or renegotiate deal by deal.
The point where you actually have influence is earlier, when you are choosing which private lender to work with in the first place. Our guide on how to compare private mortgage offers walks through weighing the full package, not just the headline rate, before you commit to one lender’s terms.
The citable fact: You cannot choose or negotiate the fee charged by the lender’s own lawyer, so the real point of comparison is the total cost across lenders before you sign a commitment letter.
What should you ask before you sign the commitment letter?
Ask whether the lender’s legal fee is disclosed in writing, how it is collected, whether it is fixed or based on the lawyer’s time, and what it includes. In Ontario, any lender or broker fee must be disclosed in writing before you sign, under the Mortgage Brokerages, Lenders and Administrators Act. In Alberta, mortgage brokering is licensed by RECA.
Get every answer in writing, in the commitment letter itself or an accompanying disclosure, not as a verbal assurance from anyone involved in the deal. If a number or a method is not written down, it is not confirmed.
A broker who arranges private mortgages regularly can flag which lenders in a given deal itemise legal costs clearly and which do not, before you commit to one. That comparison is worth doing before you sign, not after. If your plan is eventually to move from a private mortgage into a bank mortgage once your file improves, see our guide on exiting a private mortgage to a lender.
| Question to ask | Why it matters |
|---|---|
| Is the fee disclosed in writing? | Required in Ontario under the MBLAA before you sign. |
| How is the fee collected? | Confirms whether it is netted off the advance or billed separately. |
| Is the fee fixed or time-based? | A time-based fee can grow if the file becomes more complex. |
| What does the fee include? | Confirms whether registration and title costs are covered or additional. |
The citable fact: Every lender or broker fee tied to a private mortgage must be disclosed to you in writing before you sign, and the commitment letter is where that confirmation belongs.
What else should you check before closing a private mortgage?
Legal fees are one line of a larger closing picture. These related questions cover the rest of what changes at funding.
- Is there a penalty for paying out a private mortgage early?
- How do you compare private mortgage offers?
- Why is your mortgage payout statement higher than expected?
The full set lives on the Ask a Broker hub.
Frequently asked questions
Do I really pay for two lawyers on a private mortgage?
In most cases, yes. Your own lawyer represents you, and the lender’s lawyer represents the lender, and you typically cover the cost of both.
Why can’t I just use the lender’s lawyer to save money?
The lender’s lawyer represents the lender’s interests only, not yours, so using the same lawyer would create a conflict. You need independent representation to protect your side of the transaction.
Is the lender’s legal fee negotiable?
The fee itself is set by the lender and the firm it instructs, and you typically cannot negotiate it directly. What you can influence is which private lender you choose in the first place, since total costs vary between lenders.
Will I see the lender’s legal fee as a separate invoice?
Usually not. It is more commonly deducted from your mortgage advance and shown as a line on the statement of adjustments rather than billed to you directly.
What if I don’t understand a deduction on my funding statement?
Ask your own lawyer before you sign the statement of adjustments, not after funds have moved. Every deduction should be explainable in plain terms before you agree to it.
Does Ontario law require this fee to be disclosed before I sign?
Yes. Ontario’s Mortgage Brokerages, Lenders and Administrators Act requires any lender or broker fee tied to your mortgage to be disclosed to you in writing before you sign.
Does Alberta have the same rules?
Alberta mortgage brokering is licensed by RECA, the Real Estate Council of Alberta. Confirm your Alberta commitment letter with your broker so you understand every cost before signing.
Is this different from the fees on a bank mortgage?
Yes. On prime mortgages the lender compensates the brokerage and the borrower pays no fee, since the bank absorbs its own legal cost. On private mortgages the lender’s legal cost is typically passed on to the borrower.
Can the lender’s legal fee change after I sign the commitment letter?
It should not, if the commitment letter and disclosure are written clearly and the transaction closes as planned. Ask specifically whether the fee is fixed or could increase if the file becomes more complex.
Who prepares my funding statement?
Your own lawyer prepares the statement of adjustments, which lists the mortgage amount and every deduction taken before the funds reach you. Review it with your lawyer line by line before signing off.
Should I ask about the lender’s legal fee before comparing offers?
Yes. A slightly lower rate on one private mortgage offer can cost more overall once legal fees and other deductions are counted, so ask for the full cost picture before choosing a lender.
Is Pekoe’s chat a real broker or an AI assistant?
A real licensed broker answers, live during business hours, and replies directly outside them. There is no AI persona standing in for an advisor on private mortgage questions.
Get Every Legal Fee Confirmed in Writing Before You Sign
No AI persona, no call centre queue, no bank script. A licensed broker, on chat, right now.