What a Home Equity Loan Really Costs in Canada (and What Carrying Card Debt Costs)?
A private home equity loan in Canada costs far less than carrying credit card debt. On a $150,000 loan at 8.25% for one year, the all-in cost is $20,625: $12,375 in interest and $8,250 in fees. Carrying the same $150,000 on cards at 19.99% and paying only the minimums costs about $27,900 in interest in the first year alone, and takes roughly 42 years to pay off.
When the bank says no, a private loan moves fast and asks fewer questions. The cost structure is different from a bank's, so here is every piece: the rate, each fee, what lands in your account, and how it compares to doing nothing.
The card payoff time in this article assumes you never use the cards again until they are fully paid off. Use them again, and the real number is longer.
The Main Cost: Your Interest Rate
Private lender rates in Canada currently run from 7.95% to 10.95%. That is higher than a bank, and it reflects risk, not unfairness. Private lenders take deals that fall outside the bank's box: income that is hard to document, a credit hit, or an unusual property.
Where you land in that range depends mostly on your loan to value ratio and location. A GTA property with strong equity and a low LTV gets the best pricing. A rural property closer to 75% LTV sits toward the top.
On a $150,000 loan, interest-only, the range looks like this:
| Rate | Monthly Interest | Yearly Interest |
|---|---|---|
| 7.95% | $993.75 | $11,925 |
| 8.25% (our example) | $1,031.25 | $12,375 |
| 10.95% | $1,368.75 | $16,425 |
Second mortgages sit behind your first mortgage on title. If something goes wrong, the first lender is paid first. That added risk is why second mortgages cost more than first mortgages.
Interest only payments
Most private loans are interest only. You pay the interest each month and the balance stays the same. It is not a forever loan. It is a bridge of six months to two years while you fix what got you declined, then you move to a bank or other lender at a better rate. A good broker builds that exit plan on day one, not after closing.
Closing Costs: Every Fee Broken Down
Fees come off your loan proceeds at closing, before the money reaches your account. Your lawyer handles it all on closing day. You do not write separate cheques.
Fee summary
| Fee | Range | On a $150,000 Loan |
|---|---|---|
| Lender fee | 1% to 3% | $1,500 to $4,500 |
| Broker fee | 1% to 3% | $1,500 to $4,500 |
| Legal fees (both lawyers) | $1,500 to $2,500 | $1,500 to $2,500 |
| Total | $4,500 to $11,500 |
The Lender Fee
This goes to the private lender for funding the loan. It covers their admin, their review of your file and property, and part of their return. Look at the fee and the rate together: 8% interest with a 1% fee is a different deal than 10% with a 3% fee.
The Broker Fee
With a bank mortgage, the bank pays the broker and you see nothing on your statement. With a private loan, the fee comes from the borrower. It covers reviewing your equity, choosing the right lender from a network, negotiating rate and terms, packaging the file, and managing it through closing.
Your broker must give you full written disclosure of that fee before you commit. FSRA rules require brokerages to disclose fees and the cost of borrowing in writing, at least two business days before closing (FSRA disclosure requirements). If that is not happening, walk away.
Legal Fees
On a bank mortgage, you pay your own lawyer. On a private loan, you pay your lawyer and the lender's lawyer. Your lawyer registers the mortgage on title and handles the funds. The lender's lawyer protects the lender. Budget $1,500 to $2,500 in total. Title issues can push it higher.
The Appraisal
Private lending is equity based, so the lender needs a report from a licensed appraiser. If one is required, it is usually paid before closing and is not refundable if the deal does not close. It is not included in the fee totals above.
A Real Example: $150,000 Loan vs $150,000 on Credit Cards
You have $150,000 on credit cards at 19.99%. You are weighing a one year, interest only home equity loan at 8.25% against paying the card minimums.
The Loan on Closing Day
- Loan amount
- $150,000
- Lender fee at 1.5%
- $2,250
- Broker fee at 2.5%
- $3,750
- Legal fees
- $2,250
- Total fees
- $8,250
- Net funds to you
- $141,750
If you need the full $150,000 in hand, the loan is sized at about $158,600 to cover the fees. A good broker works that out before the commitment letter goes out, not after.
Monthly payment at 8.25% interest only: $1,031.25
Side by Side
| Cards, minimum payments only | Home equity loan, 1 year | |
|---|---|---|
| Rate | 19.99% | 8.25% |
| Monthly payment | $4,500 in month one, falling as the balance falls | $1,031.25 |
| Yearly payments | about $50,200 | $12,375 |
| Fees | none | $8,250 |
| Interest paid in year one | about $27,900 | $12,375 |
| Total cost in year one (interest + fees) | about $27,900 | $20,625 |
| Still owing after 12 months | about $127,700 | $150,000, refinanced or paid out at the end of the term |
| Time to pay off | about 42 years | 1 year term, then your exit plan |
| Total interest if you only pay minimums | about $187,000 | not applicable |
In year one, the loan costs about $7,300 less than the card interest, and the monthly payment is roughly $3,500 lower. The cards cost more over time because 19.99% interest eats most of each minimum payment.
How we calculated the cards
Card issuers set their own formula. We used 3% of the balance each month, with a $10 minimum, the upper end of the 2% to 3% range BDO described as typical in Canada outside Quebec. Interest is calculated monthly at 19.99% divided by 12. Some issuers charge interest plus 1% of the balance instead, which makes the payoff take closer to 55 years.
The payoff time assumes you never use the cards again until they are fully paid off. Any new purchase makes the number longer.
What a Clean Private Loan Looks Like
Private loan fees are higher than a bank's, but they should never be unclear. A licensed Ontario mortgage broker must give you written disclosure of the fees and the cost of borrowing before you sign. It shows your rate, every fee, and what you will receive at closing.
Nuborrow gives every client the full picture before they commit: rate, fees, monthly payment, net proceeds, and a plan for where you go from here.
Things that should make you pause
- A broker asking for money before a lender has reviewed your file. For mortgages of $400,000 or less, FSRA says a brokerage cannot require or accept an advance payment for its services.
- Verbal commitments with nothing in writing.
- Fees explained only at the very end of the process.
- Pressure to move before you have had time to read the documents.
- No clear answer on what you will net after fees.
- No exit plan for the end of the term.
Frequently asked questions
On a $150,000 loan at 8.25% for one year, the all-in cost is $20,625: $12,375 in interest and $8,250 in fees. That includes a lender fee of 1% to 3%, a broker fee of 1% to 3%, and legal fees of $1,500 to $2,500.
Private lender rates currently run from 7.95% to 10.95%. Where you land depends on your loan to value ratio and property location. GTA properties with strong equity and low LTV get the best pricing.
Yes. On a bank mortgage the lender pays the broker. On a private loan the fee comes from the borrower, typically 1% to 3% of the loan amount. Your broker must give you full written disclosure of that fee before you commit. FSRA rules require this at least two business days before closing.
Yes, significantly. Carrying $150,000 on credit cards at 19.99% paying only minimums costs about $27,900 in interest in the first year alone and takes roughly 42 years to pay off. A home equity loan on the same amount at 8.25% costs $20,625 all-in for the year, including all fees. That is about $7,300 less in year one, with a monthly payment roughly $3,500 lower.
In a private mortgage transaction both sides need legal representation and the borrower covers both. Your lawyer registers the mortgage on title and handles the funds. The lender's lawyer protects the lender. Budget $1,500 to $2,500 in total for a typical private second mortgage.