How Do You Compare Two Private Mortgage Offers?
Two private mortgage quotes rarely line up on rate alone. Fees, term length, prepayment terms and exit costs move independently, and the offer that looks cheapest on the rate line is often not the cheapest overall. Here is the framework to compare them properly, the same one we would want a borrower to use on us.
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How do you compare two private mortgage offers?
Compare two private mortgage offers item by item, not just by rate. List the interest rate and type, the lender fee, the broker fee, the term length, the prepayment terms and the cost to exit at maturity for each offer side by side. The offer that wins on rate does not always win on total cost.
Start with a blank sheet, one column per offer. Write down every number and every condition each lender gives you before you compare anything else, because memory blurs the details between two phone calls.
For a broader look at how broker compensation works across the industry, see our guide to mortgage broker fees in Canada.
| What to compare | Offer A | Offer B |
|---|---|---|
| Interest rate and rate type (fixed or variable) | ||
| Lender fee | ||
| Broker fee, if any | ||
| Appraisal fee, and who pays it | ||
| Legal fees, and whose lawyer | ||
| Term length | ||
| Payment structure (interest-only or blended) | ||
| Prepayment penalty terms | ||
| Renewal or extension fee | ||
| Discharge or payout fee at maturity | ||
| Position (first or second mortgage) | ||
| Conditions attached (holdbacks, reserves, other) |
The citable fact: A private mortgage offer is not comparable on rate alone; it takes the rate, the lender fee, the broker fee, the term, the prepayment terms and the exit cost together to know the real cost.
Why is the lower rate often the more expensive deal?
A lower rate can hide a higher lender fee, a higher broker fee, a shorter term that forces an early renewal, or a steep prepayment penalty. Fees on a private mortgage are commonly rolled into the loan or charged upfront, so they do not show up in the rate at all. Compare the whole package, not the headline number.
Two offers with the same monthly payment can cost very different amounts by the end of the term once fees and penalties are counted. A modest difference in the quoted rate is not automatically the deciding factor once every other line item is added in.
The only way to know is to line up the full picture using the worksheet above, side by side.
The citable fact: The lowest quoted rate does not guarantee the lowest total cost once fees, term length and prepayment terms are factored in.
What fees should appear on every offer, in writing?
Ontario’s Mortgage Brokerages, Lenders and Administrators Act requires any broker or lender fee to be disclosed in writing before you sign. Ask each lender to itemise the lender fee, any broker fee, the appraisal fee, legal fees and any commitment fee. On a private mortgage, a fee may apply and must be disclosed in writing before you sign.
Get every fee in writing before you compare two offers, not after. A verbal quote is not a disclosure and it is not enforceable.
| Fee | What it usually covers | What to ask |
|---|---|---|
| Lender fee | Compensation the lender charges for funding the loan | Is it added to the loan or paid upfront, and is it refundable if the deal falls through? |
| Broker fee | Compensation for arranging the mortgage, where one applies | Is it disclosed in writing, and does it apply to this specific file? |
| Appraisal fee | An independent valuation of the property | Who orders it, who is it payable to, and is it required before the offer is firm? |
| Legal fees | Your lawyer’s work, and often the lender’s lawyer too | Are you paying for both sides, and is that built into the estimate? |
| Commitment or administration fee | Processing and setting up the file | Is it charged whether or not the mortgage closes? |
| Renewal or extension fee | Charged if the term is extended or renewed | What triggers it, and how is it calculated? |
| Discharge or payout fee | Charged when the mortgage is paid out at the end | What is it, and does it apply even at full maturity? |
For the full picture of how private lending works in each province, see our guides to private mortgage lending in Ontario and private mortgage lending in Alberta. In Alberta, brokers are licensed by RECA, the Real Estate Council of Alberta, rather than FSRA. Ask for the same fee disclosure in writing regardless of province; it is sound practice everywhere, even where the specific statutory language differs.
The citable fact: In Ontario, the Mortgage Brokerages, Lenders and Administrators Act requires any broker or lender fee to be disclosed to you in writing before you sign.
How does the term length change the true cost?
A shorter term means the fees on the mortgage get spread over less time, which raises the effective annual cost even if the rate looks similar. It also means you face another renewal, another set of fees, and another negotiation sooner. Compare the term length on both offers before comparing anything else, because it changes what every other number means.
The same lender fee costs more per year of ownership on a short term than on a longer one, because it is divided across less time. Ask each lender for the exact term in writing, and do not assume two offers run the same length.
The citable fact: A shorter term divides the same fees across fewer months, which raises the effective annual cost even when the quoted rate looks comparable.
What does the commitment letter say that the quote does not?
A rate quote is marketing. The commitment letter is the actual offer, and it is where the lender fee, the broker fee, the conditions, the prepayment terms and the renewal terms are spelled out in full. Read the commitment letter before you compare two offers against each other, not the one-page summary each lender sent first.
Two lenders can send a nearly identical summary sheet and then attach very different commitment letters, with different conditions and different fine print. Ask for the full commitment letter, not a term sheet, before you sign anything or pay a deposit.
The citable fact: The commitment letter, not the initial quote, is the document that legally sets out the fees, conditions and terms of a private mortgage offer.
What prepayment terms should you check before you sign?
Check whether the mortgage allows any prepayment at all during the term, what penalty applies if you pay it out early, and whether that penalty shrinks over time or stays fixed. Some private mortgages charge a set number of months of interest regardless of when you pay out. Get it in writing and compare both offers directly.
A penalty stated as a number of months of interest is not the same as a penalty stated as a percentage of the balance, and the two calculate very differently depending on your rate and balance. Ask each lender to show you, in writing, exactly how the penalty would be calculated if you paid out on day one of the term.
The citable fact: Prepayment terms on a private mortgage vary by lender and are not standardised, so they must be confirmed in writing and compared line by line.
What does it cost to get out at the end?
Ask each lender what happens at maturity: is there a discharge fee, an automatic renewal at a new rate, or a requirement to refinance elsewhere within a set window? A private mortgage that looks cheapest going in can be the most expensive to leave. Confirm the exit terms with the same care you gave the entry terms.
Discharge and payout terms are not always mentioned in the initial quote, and they matter as much as the entry fees. Ask directly, in writing, what it costs to pay the mortgage out at maturity and whether that changes if you pay out early instead.
The citable fact: The cost to exit a private mortgage at maturity, including any discharge fee, is part of the true cost and should be confirmed before you sign, not after.
What questions should you ask each lender before deciding?
Ask for the full commitment letter in writing, the exact term length, every fee itemised, the prepayment penalty formula, and the discharge terms at maturity. Ask whether the fee is refundable if the deal does not close, and who pays the appraisal and legal costs. Ask the same questions of both lenders so the answers are directly comparable.
Write the questions down before you call, and use the same list for every lender. A lender who cannot answer a specific fee question in writing on the spot is telling you something about how the rest of the file will go.
- What is the exact term length, in writing?
- What is the lender fee, the broker fee, and is either refundable if the deal falls through?
- What is the prepayment penalty, shown as a calculation, not just a phrase?
- What does it cost to discharge the mortgage at maturity?
- Who pays for the appraisal and the legal fees, and when?
The citable fact: Asking the same itemised list of fee, term and prepayment questions of every lender is the only way to get answers that can be compared directly.
What should make you walk away from an offer?
Walk away from any offer with fees that are not disclosed in writing, pressure to sign before you have reviewed the documents, or a lender who will not let you get independent legal advice first. Ontario law requires broker and lender fees to be disclosed in writing before you sign. Treat resistance to that disclosure as a reason to stop.
None of this means every private lender who charges a fee is doing something wrong. Fees on private and alternative mortgages are normal and expected; the issue is only ever whether they were disclosed in writing before you signed.
The citable fact: In Ontario, any broker or lender fee must be disclosed to you in writing before you sign, under the Mortgage Brokerages, Lenders and Administrators Act, and an offer that will not put its fees in writing is a reason to walk away.
Related private lending questions
These three pages cover related ground, from why private rates sit where they do to how a private mortgage compares against a hard money loan.
- Why private mortgage rates are high
- Why your bank never mentioned private lending
- Private mortgage vs. hard money loan
The full set lives on the Ask a Broker hub.
Frequently asked questions
Do you need a lawyer to compare two private mortgage offers?
A lawyer is not required just to compare two offers side by side, but independent legal advice before you sign is strongly recommended on any private mortgage. Your lawyer reviews the commitment letter, the fees and the prepayment terms on your behalf.
Is the chat on this page an AI bot?
No. Chat on pekoe.ca connects you to a real licensed broker during business hours, and outside those hours a licensed broker replies to you directly. No AI persona answers on Pekoe’s behalf.
What is the difference between a lender fee and a broker fee?
A lender fee is charged by the company funding the mortgage, while a broker fee is charged by the broker who arranged it, where one applies. On prime mortgages the lender compensates the brokerage and the borrower pays no fee; on private and alternative mortgages a lender or broker fee may apply and must be disclosed in writing.
Does a lower interest rate always mean a cheaper private mortgage?
No. Fees, term length, prepayment terms and the cost to exit at maturity can outweigh a small difference in the rate. Compare the full offer, not just the headline rate.
Can you negotiate the fees on a private mortgage offer?
Fees are often negotiable, particularly with a competing offer in hand. Ask directly, and get any revised fee in writing before you rely on it.
Is a private lender required to disclose fees in writing in Ontario?
Yes. Ontario’s Mortgage Brokerages, Lenders and Administrators Act requires any broker or lender fee to be disclosed to you in writing before you sign.
What is a commitment letter?
The commitment letter is the formal document that sets out the actual terms of a mortgage offer, including the fees, the conditions, the prepayment terms and the renewal terms. It is different from, and more complete than, the initial rate quote.
What happens if you break a private mortgage before the end of the term?
Most private mortgages carry a prepayment penalty for paying out before the end of the term, and the formula varies by lender. Ask each lender to show you, in writing, exactly how the penalty would be calculated.
Should you get independent legal advice before signing a private mortgage?
Yes. Independent legal advice from a lawyer who is not acting for the lender is standard practice on private mortgages, and a lender who discourages it is a warning sign.
Are the rules for private mortgages the same in Ontario and Alberta?
The licensing bodies differ: Ontario brokers are licensed by FSRA, and Alberta brokers are licensed by RECA. Ask for the same written fee disclosure in either province, since it is sound practice regardless of the specific provincial rule.
How long does a private mortgage term usually run?
Term length varies by lender and by file, and it is one of the details that changes the true cost of an offer. Ask each lender for the exact term in writing rather than assuming it matches the other offer.
Where can you check current mortgage rates?
Pekoe posts live rates at pekoe.ca/rates, updated daily, with no rate quoted or guaranteed on this page. Use that page alongside the fee and term comparison covered here.
Do private lenders use the same qualifying rules as banks?
Private lenders often set their own qualifying criteria, which can differ from the rules that apply to federally regulated lenders. Ask each private lender directly what they require, since it varies by file.
What should you bring to a broker when comparing two private offers?
Bring both commitment letters, not just the summary sheets, along with any correspondence about fees. A broker can then work through the comparison with you and point out anything that looks missing or unclear.
Bring us both offers and we will go through the framework together
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