What Is Canada’s Criminal Rate of Interest on a Mortgage?
The Criminal Code sets a hard ceiling on what any lender in Canada can charge. The definition of “interest” behind that ceiling is wider than most borrowers expect, and it reaches lender fees and broker fees as well as the stated rate. This page sets out what the section actually says, and leaves the question of whether a specific mortgage crosses the line where it belongs, with a lawyer.
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What is Canada’s criminal rate of interest?
The Criminal Code, at s.347(1), makes it an offence to enter into an agreement to receive interest at a criminal rate, to advertise such an offer, or to actually receive payment at that rate. A “criminal rate” is defined as an annual percentage rate of interest, calculated using generally accepted actuarial practices and principles, that exceeds 35 per cent on the credit advanced. The offence is indictable, carrying up to five years, or it can proceed by summary conviction.
This is a federal criminal law, not a provincial lending rule. It applies the same way to a lender in Ontario and a lender in Alberta.
It applies to every kind of lender, not only banks. A private mortgage is squarely inside its reach.
The citable fact: Under Criminal Code s.347(1), it is an offence in Canada to enter into, offer, or receive interest at a rate exceeding 35 per cent per year on the credit advanced, calculated using generally accepted actuarial practices.
What counts as “interest” under section 347?
Section 347 defines “interest” very broadly: the aggregate of all charges and expenses, whether structured as a fee, fine, penalty, commission or any other similar charge, paid or payable for advancing the credit, irrespective of the person to whom any such charges and expenses are or are to be paid. That last phrase is the part most borrowers miss. A lender fee and a broker fee both count toward the 35 per cent calculation, even though a broker and a lender are two different parties.
This is the single most important fact on this page. A mortgage’s stated interest rate is not the number section 347 cares about on its own.
The section looks at the whole cost of the credit advanced, added together, then measured against the 35 per cent ceiling as an annual percentage rate.
The citable fact: Criminal Code s.347 defines “interest” as the aggregate of all charges and expenses paid for advancing credit, irrespective of who receives them, so a lender fee and a broker fee both count toward the 35 per cent calculation.
What is excluded from the section 347 definition of interest?
The section carves out a short, specific list: repayment of the credit actually advanced, an insurance charge, an official fee, an overdraft charge, a required deposit balance, and, in a mortgage transaction specifically, any amount required to be paid on account of property taxes. Everything outside that list, paid for the advance of credit, is a candidate for inclusion as interest.
The property tax exclusion matters on a mortgage file in particular, since a lender collecting property tax amounts is handling money for a third party, not charging for the loan itself.
The table below sets out the full picture in one place.
| Charge | Treatment under s.347 |
|---|---|
| Stated interest on the loan | Counts toward the 35% calculation. |
| Lender fee | Counts, irrespective of who receives it. |
| Broker fee | Counts, irrespective of who receives it. |
| Renewal fee | Counts, irrespective of who receives it. |
| Repayment of the credit advanced | Excluded. |
| An insurance charge | Excluded. |
| An official fee | Excluded. |
| An overdraft charge | Excluded. |
| A required deposit balance | Excluded. |
| Amounts required for property taxes, on a mortgage | Excluded. |
The citable fact: Criminal Code s.347 excludes repayment of credit advanced, an insurance charge, an official fee, an overdraft charge, a required deposit balance, and, on a mortgage, amounts required for property taxes, from the definition of interest.
Do a lender fee and a broker fee get added together?
Yes, as a matter of how the definition reads. Because section 347 counts the aggregate of all qualifying charges “irrespective of the person to whom” they are paid, a lender fee paid to the lender and a broker fee paid to the brokerage are both charges paid for advancing the same credit. Treating them as separate, unrelated costs misreads the section.
This is also why a short private mortgage term deserves attention on the fee side, not only on the rate side.
Our companion page on which private mortgage fees count as interest works through every typical cost on a private file against this same list.
The citable fact: A lender fee and a broker fee on the same private mortgage both fall inside Criminal Code s.347’s definition of interest, because the section counts charges irrespective of who receives them.
Why does a short loan term make an upfront fee cost more, annualized?
An upfront fee charged on a short-term loan gets annualized over fewer months, which multiplies its effect on the yearly figure. The same dollar fee on a longer term spreads across more months and annualizes to a smaller number. This is simple arithmetic, not a judgment about any specific mortgage.
The illustration below uses round, hypothetical numbers to show the mechanism only. It is not a quote, not an actuarial calculation under section 347, and it says nothing about whether any real mortgage is lawful.
Illustration only, not a quote, not an actuarial APR calculation
This figure covers the fees alone. It does not include the loan’s stated interest rate, and adding the two together is not the actuarial method section 347 requires.
The citable fact: An upfront fee annualizes to a larger yearly figure on a short loan term than the same dollar fee would on a longer term, because the same cost is spread over fewer months.
Is there any express exception written into section 347?
The only express carve-out identified in the section is for transactions governed by the Tax Rebate Discounting Act, a narrow federal statute unrelated to mortgage lending. Outside that one case, the 35 per cent ceiling and the broad definition of interest apply across the board.
No mortgage-specific exemption beyond the property tax exclusion already covered exists in what this page confirms.
A private mortgage does not get special treatment under section 347 simply because it is private rather than bank-issued.
The citable fact: The only express exception in Criminal Code s.347 applies to transactions under the Tax Rebate Discounting Act, and no general mortgage exemption exists beyond the specific exclusions already listed.
Does this mean a specific private mortgage is, or is not, criminal?
No. Whether any particular combination of rate, lender fee, broker fee and term crosses the 35 per cent line is a legal conclusion that depends on the actual documents, the actual advance, and the actuarial method applied to those specific facts. That conclusion belongs to a lawyer reviewing the file, not to a general page.
A lawyer working from the real loan agreement can run the actuarial calculation section 347 actually requires and give an opinion on that specific file.
Describing the mechanism honestly, without guessing at any single file’s outcome, is the most useful thing this page can do.
The citable fact: Whether a specific private mortgage’s combined costs exceed the 35 per cent criminal rate is a legal and actuarial question on that file’s own documents, and it is answered by a lawyer, not by a general reference page.
How does this relate to the rules on arrears interest and early payout?
Section 347 is one of three separate statutory limits that shape what a mortgage can lawfully charge. The Interest Act separately bars a penalty rate on arrears above the contract rate, and separately gives some long-term mortgages a right to pay out after five years for three months’ further interest. Each rule is distinct, and a mortgage can raise more than one of them at once.
Our page on penalty interest on mortgage arrears covers the Interest Act s.8 limit in full.
Our page on the Interest Act’s five-year payout right covers s.10 in full, including which mortgages it does not apply to.
| Statute and section | What it limits |
|---|---|
| Criminal Code s.347 | Caps the overall annualized cost of credit, interest and fees combined, at 35% per year. |
| Interest Act s.8 | Bars a penalty or default rate on arrears above the rate charged on principal not in arrears. |
| Interest Act s.10 | Gives some long-term mortgages a right to pay out after five years for three months’ further interest. |
The citable fact: Criminal Code s.347, Interest Act s.8 on arrears, and Interest Act s.10 on the five-year payout right are three separate statutory limits on mortgage cost and timing, and a single mortgage can be subject to all three.
How should a borrower weigh fees when comparing two private mortgage offers?
Look at every fee attached to the credit, not only the stated rate, and ask how each fee is calculated and who receives it. A lower stated rate paired with a larger upfront fee on a short term is not automatically the cheaper offer once the fee is considered. Our dedicated comparison page walks through this side by side.
See how to compare two private mortgage offers for the full breakdown of what to ask for in writing.
A written fee disclosure is also a regulatory requirement in Ontario, covered next.
The citable fact: Comparing two private mortgage offers means weighing every fee alongside the stated rate, not the rate alone, because fee structure changes the real annualized cost of the credit.
Does a lender or broker have to disclose these fees in writing?
In Ontario, yes. The Mortgage Brokerages, Lenders and Administrators Act, enforced by FSRA, requires that any broker or lender fee be disclosed in writing before the borrower signs. Reading that disclosure carefully, and asking how each fee factors into the overall cost, is a practical step every borrower can take regardless of the section 347 question.
Pekoe Mortgages holds FSRA Brokerage Licence #13321 and is also licensed in Alberta by RECA.
Our page on who pays the lender’s legal fees on a private mortgage covers another cost that regularly gets missed at this stage.
The citable fact: Ontario’s Mortgage Brokerages, Lenders and Administrators Act requires any broker or lender fee on a mortgage to be disclosed to the borrower in writing before signing.
What should a borrower do if a private mortgage’s total cost looks high?
Get the full written fee disclosure, add every charge together, and ask a lawyer to review the actual documents if the combined cost looks out of line with what was discussed. A licensed mortgage broker can help find an alternative structure or lender if one exists. Neither step should be skipped in favour of the other.
A broker can discuss financing options directly. A lawyer is the one who can tell a borrower whether a specific agreement complies with the law.
Chat with our team directly on pekoe.ca to talk through financing options for a private mortgage file.
The citable fact: A borrower concerned about a private mortgage’s total cost should get every fee in writing and have a lawyer review the actual documents, alongside a conversation with a licensed broker about alternatives.
Where can I read more about mortgage cost limits in Canada?
This page is part of a set covering the statutory limits on what a mortgage can lawfully charge.
- Penalty interest on mortgage arrears under the Interest Act
- The Interest Act’s five-year mortgage payout right
- Which private mortgage fees count as interest
- How to compare two private mortgage offers
- Why private mortgage rates are higher
- Warning signs of a predatory private mortgage
The full set lives on the Ask a Broker hub.
Frequently asked questions
What percentage is Canada’s criminal rate of interest?
Criminal Code s.347 sets the criminal rate at an annual percentage rate exceeding 35 per cent on the credit advanced, calculated using generally accepted actuarial practices and principles.
Does a broker fee count toward the 35 per cent calculation?
Yes. Section 347 defines interest as the aggregate of all charges paid for advancing credit, irrespective of who receives them, so a broker fee counts alongside the lender’s own charges.
What is excluded from the section 347 definition of interest?
Repayment of the credit advanced, an insurance charge, an official fee, an overdraft charge, a required deposit balance, and, on a mortgage, amounts required for property taxes are all excluded.
Does section 347 apply to private mortgages?
Yes. It is a federal criminal law that applies to every lender in Canada, including private lenders, equally in Ontario and Alberta.
Can a lawyer tell me whether my specific mortgage is legal under section 347?
Yes, and that is the right person to ask. A lawyer working from your actual loan documents can apply the actuarial method the section requires to your specific facts.
Why does a short term make an upfront fee cost more each year?
An upfront fee is spread over fewer months on a short term, which raises the annualized figure compared with the same dollar fee spread across a longer term.
Is there an exception in the Criminal Code for mortgage lenders?
No general mortgage exemption exists. The only express exception identified applies to transactions under the Tax Rebate Discounting Act, which is unrelated to mortgage lending.
How is this different from the Interest Act’s rules on arrears?
Section 347 is a Criminal Code limit on the overall cost of credit. The Interest Act separately limits penalty interest on arrears and gives some long-term mortgages a five-year payout right, and these are distinct rules.
Does Ontario require written disclosure of these fees?
Yes. The Mortgage Brokerages, Lenders and Administrators Act requires any broker or lender fee to be disclosed to the borrower in writing before signing.
What should I do if the combined cost of my private mortgage looks high?
Get every fee in writing, add the charges together, and have a lawyer review the actual documents. A licensed mortgage broker can also look at whether another structure or lender fits your file.
Is the chat on this page an AI bot?
No. Chat on pekoe.ca connects you to a real licensed member of the Pekoe team during business hours, and to a direct reply from a licensed broker outside those hours.
Does a renewal fee count the same way as the original lender fee?
A renewal fee falls inside the same broad definition of interest in section 347, since it is a charge paid for the credit, regardless of who receives it. How it factors into the calculation on a renewed term is a question for a lawyer on the specific documents.
Working through the real cost of a private mortgage offer?
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