How do you spot a predatory private mortgage before you sign?
A private mortgage is a legitimate tool when your file does not fit a bank’s box. The warning signs that matter are almost never about the interest rate. They show up in conduct: fees requested before anything is committed to writing, pressure to sign the same day, and a broker or lender who will not produce a licence number.
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What are the warning signs of a predatory private mortgage?
The warning signs cluster around conduct, not price: fees requested before you have a signed commitment, refusal to put a fee in writing, pressure to sign the same day, no licence number offered, discouragement from getting your own lawyer, blank spaces left in documents, and a stated property value that does not match any appraisal you have seen.
None of these behaviours make a private mortgage illegal on their own. A private mortgage is a legitimate lending product, and Pekoe arranges them regularly for borrowers whose file does not fit a bank’s criteria. What separates a sound deal from a bad one is how the other side behaves before you sign.
Each behaviour below is checkable without any legal training. A missing licence number, a blank line in a document, or a fee that appears before any paperwork exists are all facts you can verify for yourself.
| Behaviour | Why it matters |
|---|---|
| Fee demanded before anything is committed to writing | A legitimate fee arrangement is set out in writing before you owe anything. |
| Refusal to put a fee in writing | Ontario’s MBLAA requires broker and lender fees to be disclosed in writing before you sign; a refusal removes your only record. |
| Pressure to sign the same day | A genuine offer holds long enough for you to read it fully and ask questions. |
| No licence number offered | A licensed broker or brokerage gives you this information without hesitation. |
| Discouraging you from hiring your own lawyer | Independent legal advice protects your interests specifically, and nobody on the other side of the deal benefits from you skipping it. |
| Blank spaces left in documents | A blank space can be filled in after you sign, without your knowledge. |
| A stated value with no matching appraisal | The number backing your loan-to-value should trace to a document you have actually seen. |
The citable fact: the warning signs of a predatory private mortgage are about conduct, not price, and the clearest ones are checkable facts: an upfront fee, no written fee agreement, same-day signing pressure, no licence number, discouragement from hiring your own lawyer, blank spaces in documents, and a stated value that does not match an appraisal you have seen.
What should never happen before you have a commitment in writing?
Nothing should change hands before you have a signed commitment letter or fee agreement in front of you. That means no deposit, no upfront fee, and no request for banking information beyond what is needed to verify your identity and file. If money or sensitive information is requested before paperwork exists, stop and ask why.
The normal sequence runs in one direction. You apply, the lender reviews your file, and only once terms are agreed does a commitment letter or fee agreement get signed. Money changes hands after that document exists, not before it.
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 (MBLAA). In Alberta, the brokerage and the individual you deal with must be licensed by RECA. Ask for the fee arrangement in writing regardless of the province you are in.
Our page on private mortgage lending in Ontario covers how this fits into a purchase or refinance from start to finish.
The citable fact: no deposit, fee, or request for sensitive financial information belongs on the table before a commitment letter or fee agreement exists in writing.
What does proper fee disclosure look like?
Proper fee disclosure is a written document, given to you before you sign, that states the exact fee amount, who is charging it, and when it is payable. In Ontario this is required under MBLAA for any broker or lender fee. A verbal promise, a text estimate, or a number that only appears after you have signed is not proper disclosure.
Look for a document with a specific dollar figure or a clearly stated formula, not a range or an estimate. It should name who receives the fee and when it is due.
Our Alberta private mortgage lending page covers how RECA licensing fits into a private deal there.
| Aspect | Ontario | Alberta |
|---|---|---|
| Governing framework | Mortgage Brokerages, Lenders and Administrators Act (MBLAA) | RECA licensing rules for mortgage brokerages and individuals |
| Written fee disclosure | Required in writing before you sign | Ask for the fee arrangement in writing as standard practice |
| On prime mortgages | Lender compensates the brokerage; no fee to the borrower | Same practice |
| On alternative or private mortgages | A lender or broker fee may apply, disclosed in writing before signing | A fee may apply; get it in writing before you sign |
The citable fact: in Ontario, MBLAA requires any broker or lender fee to be disclosed in writing before you sign, and getting the same document in writing is worth insisting on in Alberta as standard practice.
What does pressure look like, and why does it work?
Pressure usually sounds like urgency: the rate expires today, another buyer is waiting, the file falls apart if you do not sign now. It works because a rushed decision skips the very steps that catch a bad deal, like reading the document fully or calling a lawyer. Legitimate terms do not evaporate overnight.
Ask yourself what actually happens if you take 24 hours to have a lawyer read the document. In almost every legitimate deal, nothing changes. If the whole deal falls apart over a short delay, that answer is itself information.
A broker or lender confident in their terms will not object to reasonable time for independent legal review. Objecting to that request is worth paying attention to on its own.
The citable fact: same-day signing pressure works because it skips verification, not because the terms are genuinely time-limited, and a legitimate offer survives a short delay for independent legal review.
What should you always be able to verify independently?
You should be able to independently verify four things: the broker’s or brokerage’s licence number against FSRA in Ontario or RECA ProCheck in Alberta, the fee arrangement in writing, the appraisal or valuation supporting the loan amount, and the identity of the actual lender putting up the funds. If any of these cannot be confirmed outside a conversation with the person selling you the deal, treat that as unresolved, not settled.
Start with the licence number. Our page on how to check a mortgage broker’s licence walks through exactly how to confirm it against FSRA or RECA ProCheck before you go any further.
| What to verify | Where to check |
|---|---|
| Broker or brokerage licence number | FSRA’s consumer mortgage brokering page in Ontario; RECA ProCheck in Alberta |
| Written fee agreement | The document itself, not a verbal summary |
| Appraisal or valuation | The appraisal report, not a number relayed to you secondhand |
| Identity of the actual lender | The commitment letter or mortgage documents, which should name who is actually lending the money |
The citable fact: a licence number, a written fee agreement, an appraisal, and the lender’s identity are all things you can verify outside the conversation you are having, and a deal that resists that verification deserves more scrutiny, not less.
What should you never sign?
Never sign a document with blank spaces left in it, a document you have not read in full, or a document your own lawyer has not reviewed on a private mortgage. Never sign a commitment or mortgage where the lender’s identity, the fee, or the property value differs from what you were told verbally. A blank space or a mismatch is a reason to stop, not a detail to fix later.
A blank space in a document is not an oversight worth shrugging off. Once you sign, whoever fills that space in decides what number goes there, not you.
On a private mortgage specifically, get your own real estate lawyer to review the documents before you sign, independent of any lawyer suggested by the lender or broker. Comparing more than one offer side by side, covered on our page on how to compare private mortgage offers, makes it easier to notice when one deal’s terms have shifted from what you agreed to verbally.
The citable fact: a document with blank spaces, terms that do not match what you were told verbally, or no independent lawyer review is not one to sign, on a private mortgage or any other.
Is a high rate by itself a warning sign?
No. A private mortgage typically carries a higher rate than a bank mortgage because it is pricing a different kind of risk: a shorter credit history, bruised credit, an unusual property, or a timeline a bank cannot meet. A higher rate on its own tells you about risk, not about honesty. The warning signs on this topic are about conduct, not price.
Private lenders take on files that banks decline, and they price for that risk the same way any lender prices for risk it is taking on. That is a legitimate business decision, not evidence of wrongdoing. Our page on why private mortgage rates are high covers the mechanics in full.
Judge a private mortgage on the behaviour of the people arranging it, not on the number attached to the interest. A fair rate delivered through bad conduct is still a bad deal. A high rate delivered with full disclosure and no pressure can be exactly the right tool for a specific file.
The citable fact: a high rate on a private mortgage reflects risk pricing, not misconduct, and the real warning signs are about conduct: fees, pressure, disclosure, and documentation, never the rate by itself.
What should you do if something feels wrong?
Pause before you sign or pay anything. Verify the licence number against FSRA or RECA ProCheck, ask for the fee arrangement in writing, and have your own lawyer review the documents. If you want a second opinion on a specific offer, a licensed broker can look at it with you before you commit to anything.
Trust the discomfort. If a fee shows up before paperwork, if pressure to sign same-day arrives, or if a licence number will not materialize, those are reasons to stop and verify, not manners to work around.
The citable fact: pausing to verify a licence number, get a fee agreement in writing, and secure independent legal review costs you a delay, while skipping those steps risks a document you cannot undo.
What if you have already signed?
Signing a document does not automatically mean you have been wronged, and it does not mean you are without options either. Have a real estate lawyer, ideally one you choose yourself, read everything you signed and explain what it actually says. What you can do next depends entirely on the specific wording of your own documents and your own province’s law.
Whether a specific clause is enforceable, whether a fee was properly disclosed, and what your options are, are questions that turn on your own paperwork and your own province’s law. Ask your lawyer to work them through against the actual documents you signed.
If you are also weighing how to move out of a private mortgage into different financing, our page on exiting a private mortgage to a new lender covers that separate question.
If your concern is about how a licensed broker or brokerage behaved rather than about the legal terms of the loan, that is a separate and simpler path. In Ontario you can raise it with FSRA’s complaint process. In Alberta, conduct complaints about a licensed professional go to RECA.
The citable fact: after signing, a real estate lawyer reviewing your specific documents, not a general warning list, is what determines your actual options, and a licensing complaint to FSRA or RECA is a separate track from a legal remedy.
Where else can you get a straight answer on private mortgages?
These related questions come up alongside a licence and fee check constantly.
- How do you check a mortgage broker’s licence?
- How do you compare two private mortgage offers side by side?
- Why are private mortgage rates higher than a bank’s?
The full set lives on the Ask a Broker hub.
Frequently asked questions
Is private lending itself a warning sign?
No. Private mortgages are a legitimate lending option for files that do not fit a bank’s criteria, and Pekoe arranges them regularly. The warning signs described here are about how a specific lender or broker behaves, not about the product itself.
Is charging a fee before you sign automatically wrong?
Not necessarily, but it should never happen before the fee is set out in writing. Treat any fee requested before you have a signed agreement as a reason to pause and get the arrangement in writing before you pay anything.
Does a high interest rate mean a private mortgage is predatory?
No. Private lenders price for risk that banks will not take on, so a higher rate reflects that risk rather than misconduct. Judge the deal on how it is disclosed and handled, not on the rate by itself.
What does Ontario’s MBLAA require for fee disclosure?
Ontario’s Mortgage Brokerages, Lenders and Administrators Act requires any broker or lender fee to be disclosed to you in writing before you sign. A verbal estimate or a number that only appears after signing does not meet that standard.
Does Alberta have the same written fee disclosure rule as Ontario?
Alberta brokerages and individuals arranging mortgages are licensed by RECA. Ask for any fee arrangement in writing as standard practice regardless of province.
What should I do if a broker will not give me a licence number?
Treat that as a reason to stop before you sign or pay anything. A licensed broker or brokerage gives you this information without hesitation.
Where do I check a mortgage broker’s licence?
In Ontario, start with FSRA’s consumer mortgage brokering page. In Alberta, use RECA ProCheck, which confirms whether a mortgage professional is licensed and in good standing.
Should I use the lawyer the lender or broker recommends?
Get your own real estate lawyer, chosen independently of the lender or broker, to review any private mortgage documents before you sign. Independent advice protects your interests specifically, which is the point of getting it.
What if I already signed and now feel uneasy about the deal?
Signing does not automatically mean you were wronged, and it does not mean you have no options either. Have a real estate lawyer read everything you signed and explain what your specific documents allow.
Can I complain to a regulator about a licensed broker’s conduct?
Yes. In Ontario, contact the brokerage first, then FSRA if the concern involves regulatory compliance or you get no written response. In Alberta, conduct complaints about a licensed professional go to RECA.
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.
What is the fastest way to slow down a rushed private mortgage deal?
Ask for 24 hours to have your own lawyer read the documents. A legitimate lender’s terms will still be there tomorrow, and if they are not, that itself is information worth acting on.
Get a second opinion before you sign anything.
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