The Challenge
At first, a private mortgage against the existing property appeared to be the quickest way to access equity. However, when the proposed private mortgage payment was added to the clients' debt obligations, their ratios no longer supported approval for the new purchase mortgage with the bank. The challenge was to access the required equity without creating a new high-payment obligation that would damage qualification on the purchase side.
Why this file was unique
Recently funded files often involve more than one issue: timing, property type, lender appetite, documentation, repayment capacity, equity, or exit strategy.
HopeWell’s Approach
HopeWell reviewed both properties, the appraisal shortfall, the clients' income, the purchase mortgage requirements, and the impact of different financing structures on debt-service ratios. Instead of arranging a private mortgage, we refinanced the clients' existing mortgage on the A side at a low institutional rate, allowing them to access equity for the additional down payment while keeping monthly obligations manageable. We then arranged the mortgage on the new Mississauga property with the same lender, keeping the overall structure cleaner and the ratios in line.
Result
The clients were able to access the equity needed for the additional down payment without relying on a higher-cost private mortgage. Because the refinance was completed at a low A-lender rate, the monthly payment impact was controlled, the purchase mortgage ratios remained acceptable, and the clients were able to move forward with their pre-construction closing.
Key Takeaway
A fast private mortgage is not always the right solution. When a borrower needs equity for a purchase, the added payment must be tested against the new mortgage qualification. In this case, a lower-rate A-lender refinance created a better outcome than a private mortgage because it solved the down payment shortfall without damaging the clients' ability to qualify.
Related mortgage options
Files like this may involve more than one possible structure. The right path depends on property, equity, borrower profile, cost, timing, and exit strategy.
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