Hidden Costs of Private and Secondary Mortgage Lenders

Private and secondary lenders commonly charge a lender fee on top of the interest rate — often in the range of 1-3% or more of the loan amount, deducted from the funds advanced or added to the loan — which meaningfully increases the real cost beyond the quoted rate alone.

Brokers arranging private financing may also charge their own fee, separate from the lender's fee — always ask explicitly whether a broker fee applies and how much, since it isn't always volunteered upfront.

Private mortgages often require independent legal representation for the borrower (separate from the lender's lawyer), and sometimes require the borrower to cover both sides' legal costs — a real expense that doesn't show up in the headline rate.

Terms are typically short (often one year), meaning renewal or refinancing fees recur more frequently than with a conventional mortgage — and if your plan to refinance into conventional financing takes longer than expected, those renewal costs (and potentially prepayment penalties even on a short private term) can accumulate.

Before signing, ask for the total cost in dollars — not just the rate — including every fee, over the actual term length, and compare that real number against your alternatives rather than comparing headline rates alone.