Milton Private Second Mortgage for New Self-Employed Borrowers Repaying Family Loans

1. Executive Summary

Milton clients needed a second mortgage to access equity and return money they had borrowed from relatives. Both husband and wife were self-employed, but their businesses were very new. There was not enough history to use a bank-statement-supported stated-income program at the time. We assessed their situation and recommended a private second mortgage. The exit strategy was to revisit a refinance at the end of the term, when the clients should have enough self-employment history and bank-statement evidence to qualify under a stated-income program.

2. Borrower Profile

The borrowers were homeowners in Milton, Ontario. Both husband and wife were self-employed, but their businesses were newly established. The clients wanted to access equity to repay money borrowed from relatives. Borrower identities, business types, income figures, credit scores, amount borrowed from relatives, and lender name are not disclosed.

3. Property Profile

The financing was secured against an owner-occupied residential property in Milton, Ontario. The second mortgage was placed behind the existing first mortgage. Exact address, property value, first mortgage balance, second mortgage amount, combined loan-to-value, rate, fees, and lender name are not disclosed.

4. The Challenge

The clients needed equity access, but both borrowers were newly self-employed. Their businesses had not been operating long enough to support a stated-income application based on bank statements. A regular A-lender or B-lender refinance was not available at the time. The file needed a short-term second mortgage that solved the immediate family-loan repayment need while creating a realistic future exit once income history matured.

5. Why Conventional Solutions Failed

A stated-income B-lender refinance was not available at the time because the borrowers’ businesses were too new and there was not enough bank-statement history to support the income. Many stated-income programs still require a reasonable history of self-employment and enough bank statements to show consistent deposits. Without that history, the file could not be supported through the stated-income channel yet. A short-term private second mortgage was therefore used as a bridge until the income history matured.

6. Our Analysis

Our analysis focused on timing and exit. The clients needed funds immediately to repay relatives, but the stronger refinance option was expected to become available later once enough self-employment history existed. We reviewed whether a second mortgage could solve the immediate need without disturbing the existing first mortgage. The key was to treat the private second mortgage as a temporary bridge, not a permanent solution.

7. Financing Structure

The file was structured as a private second mortgage behind the existing first mortgage. The proceeds were used to repay money borrowed from relatives. The planned exit was a future refinance review at the end of the private mortgage term once the clients had enough self-employment history and bank-statement evidence to support stated-income qualification. Public details do not disclose the lender name, mortgage amount, rate, fees, term, property value, combined loan-to-value, first mortgage balance, or family-loan amount.

8. Why the Solution Worked

The solution worked because it matched the client’s current limitation and future path. At the time of application, there was not enough self-employment history for a stated-income lender. But by the end of the private mortgage term, the clients were expected to have more business history and bank-statement evidence. The underwriting principle is that private lending can be suitable when it bridges a temporary documentation gap and the exit depends on a realistic future improvement in the file.

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