12-Month Private Mortgage in Quebec: The Total Cost, Fees Included

A bank turned down your application, and a private lender is offering a 12-month loan at a rate that looks manageable. That rate is only part of the picture. On top of the interest come lender fees, broker fees, legal or notary fees, an appraisal and, if your exit runs late, extension fees. This article breaks those items down and adds them up on a hypothetical example. How private lending works in general, its risks and the alternatives are covered in our article on private mortgage lenders in Quebec.

The advertised rate is one line on the bill

A conventional mortgage runs for years, so any setup fees are spread over a long period. A 12-month private loan is different: the fees are paid once, but they buy you only one year of credit. Their relative weight is much heavier.

The useful question is not "what is the rate" but "how many dollars will I pay, in total, to borrow this amount for this long". The follow-up question is "what happens if I cannot repay on the planned date".

The cost items to get in writing

Before signing, ask for a written breakdown of every item. Names vary between lenders, but you will usually find:

• Interest. Many short-term private loans are interest-only: the principal is not paid down during the term and is due in full at maturity.
• Lender fees (setup, commitment or file fees), often expressed as a percentage of the loan and sometimes held back from the amount advanced.
• Mortgage broker fees, when the borrower rather than the lender pays the broker.
• Legal or notary fees for the hypothec deed and its registration. In Quebec, a mortgage is registered as a hypothec, usually through a notary.
• The appraisal the lender requires.
• Renewal or extension fees if the loan is not repaid at maturity, and any prepayment penalty.

When fees are held back from the advance, you receive less than you borrowed but pay interest on the full amount. Check that line by line.

A worked hypothetical example

The amounts below are hypothetical. They only show how the math works and do not describe market rates or fees. Assume a $300,000 loan over 12 months at 9% annual interest, interest-only:

• Interest: $300,000 × 9% = $27,000 for the year, or $2,250 a month.
• Hypothetical lender fee of 2%: $6,000.
• Hypothetical broker fee of 1%: $3,000.
• Hypothetical legal fees: $1,500.
• Hypothetical appraisal: $500.

Fees add up to $11,000. The total cost over 12 months is therefore $38,000, or 12.7% of the amount borrowed over one year, against an advertised rate of 9%. At maturity, the full $300,000 of principal is still owed.

That 12.7% is a simple ratio of total cost to the amount borrowed. It is not the actuarial calculation behind an annual percentage rate (APR), which accounts for the timing of each payment and the amount actually advanced.

The actual term changes the annualized cost

Fixed fees do not shrink when the loan ends early. In the same hypothetical example, if the property sells and the loan is repaid after 6 months, interest paid is $13,500. With $11,000 of fees, the cost reaches $24,500 over six months, about 16.3% once annualized.

If the exit runs late, the dollar cost climbs instead. Assume a 3-month extension with a hypothetical 1% fee ($3,000) and $6,750 of additional interest: total cost reaches $47,750 over 15 months. The annualized figure stays close to 12.7%, but the bill is $9,750 higher.

Your exit strategy is part of the cost

A 12-month private loan ends one of two ways: refinancing with a conventional lender, or selling the property. Each has its own cost to add to the calculation:

• Refinancing means new legal fees, sometimes a new appraisal, and assumes the file will qualify in 12 months. Whatever caused the original refusal must be fixed by then.
• Selling means brokerage commission, fees to discharge the hypothec, and a price set by the market at the time of sale.

An exit that is not ready at maturity leads to an extension, priced by the lender. Before signing, write down how and when the loan will be repaid, and what a three- or six-month delay would cost.

The Criminal Code ceiling: what it covers

Since January 1, 2025, section 347 of the Criminal Code defines the criminal rate as an annual percentage rate, calculated in accordance with generally accepted actuarial practices and principles, that exceeds 35% on the credit advanced. The previous threshold was set as an effective annual rate.

For that calculation, the law does not count interest in the everyday sense only. It covers all charges and expenses paid or payable for the credit, whether in the form of a fee, fine, penalty or commission. It excludes, among other things, repayment of the principal, insurance charges, official fees and, for a mortgage or hypothec, amounts paid on account of property taxes.

That ceiling sets a criminal limit. It does not mean a loan below it is reasonable for your situation. The total cost in dollars remains the decision tool.