Brampton Rental Portfolio Moved from High-Interest Private Mortgage to B Lender

1. Executive Summary

Two self-employed friends in Brampton owned several rental properties together. They had purchased another rental property the previous year, but because of large mortgages on the existing properties and rental deficits after expenses such as property tax, insurance, and vacancy, they could not qualify on the A side. The property had been placed with a private lender at a very high interest rate and approximately 80% LTV. The clients approached us for a solution. We analyzed their business bank statements and identified a B lender that could consider stated income based on 12 months of bank statements and apply up to a 90% rental offset, subject to policy. The clients moved from a high-interest private mortgage to a lower-interest B-lender mortgage.

2. Borrower Profile

The borrowers were two self-employed friends in Brampton, Ontario. They jointly owned multiple rental properties and had recently purchased another rental property. Their self-employed income and rental portfolio required detailed review. Borrower identities, businesses, income, credit scores, property addresses, rental amounts, and lender names are not disclosed.

3. Property Profile

The refinance involved an investment property that had been placed with a private lender at approximately 80% loan-to-value. The borrowers also owned several other rental properties with large mortgages. After lender expenses such as property tax, insurance, vacancy, and other carrying costs were considered, the rental properties showed deficits. Exact property values, mortgage balances, rents, expenses, rates, and lender names are not disclosed.

4. The Challenge

The clients had multiple rental properties, but the properties did not show strong positive cash flow after lender expenses were applied. Once property tax, insurance, vacancy, mortgage payments, and other rental-property expenses were considered, the portfolio showed deficits. This made A-lender qualification difficult. The property had also been financed by a private lender at a high interest rate and 80% LTV, creating pressure to find a lower-cost exit.

5. Why Conventional Solutions Failed

A-lender qualification was not available because the rental portfolio did not support the ratios under standard rental-income calculations. Even when properties collect rent, lenders usually apply expenses and rental worksheets. After property tax, insurance, vacancy allowance, mortgage payments, and other carrying costs were factored in, the portfolio showed deficits. The large existing mortgages further weakened the file. The clients therefore needed a B lender with a rental-income policy that could better fit the portfolio and a self-employed income approach that could use bank statements.

6. HopeWell’s Analysis

Our analysis focused on two areas: rental offset and self-employed income. First, we reviewed how the rental portfolio performed under lender-style calculations, not just gross rent collected. Second, we reviewed 12 months of business bank statements to determine whether stated income could be supported. The key was finding a lender whose rental-offset policy was more favourable and whose self-employed income policy could consider bank-statement cash flow. That combination allowed the file to move from private lending to a B-lender refinance.

7. Financing Structure

The file was structured as a B-lender refinance replacing the existing high-interest private mortgage. The lender considered stated income based on 12 months of business bank statements and applied its rental-offset policy, which could consider up to 90% rental offset subject to full lender review. Public details do not disclose the lender name, mortgage amount, rate, fees, term, amortization, property value, loan-to-value, income, rents, expenses, or debt-service ratios.

8. Why the Solution Worked

The solution worked because the lender matched the real structure of the file. A lender using stricter rental worksheets may have shown too much rental deficit. A lender with a more flexible rental-offset approach reduced the drag from the rental portfolio. The 12-month business bank-statement review supported the stated-income side of the application. Together, those two policy points allowed the clients to exit high-interest private financing and move into a lower-interest B-lender mortgage.

10. Related HopeWell Resources