Vaughan Preconstruction Purchase Closed with Open Private Mortgage and Sale Exit

1. Executive Summary

A Vaughan client had entered into a preconstruction purchase after advice from friends. He soon realized that he could neither qualify for the required mortgage nor afford to keep the home. Based on his income, he would not qualify with an A lender or B lender. His goal became to close the purchase and then sell the property. We arranged a short-term open private mortgage so he could close the transaction. The open mortgage was recommended because he planned to sell the home and did not want to face a prepayment penalty when repaying the mortgage after sale.

2. Borrower Profile

The borrower was a Vaughan client who had committed to a preconstruction purchase. After reviewing affordability and qualification, it became clear that the client could not support the required mortgage through A-lender or B-lender financing. Borrower identity, occupation, income amount, credit score, down payment amount, and lender name are not disclosed.

3. Property Profile

The subject property was a preconstruction residential purchase in Vaughan, Ontario. The client intended to close the purchase and then sell the property rather than keep it long term. Exact address, builder name, purchase price, appraised value, mortgage amount, loan-to-value, rate, term, fees, and lender name are not disclosed.

4. The Challenge

The client was committed to a preconstruction purchase that no longer made sense for his income or affordability. A-lender and B-lender financing were not realistic because the income did not support the required mortgage. Failing to close could have exposed him to deposit loss, builder claims, extension costs, or other legal and financial consequences. The solution needed to close the transaction while preserving the ability to sell quickly afterward.

5. Why Conventional Solutions Failed

A-lender and B-lender financing were not viable because the client’s income did not support the required mortgage. The problem was not simply lender selection; it was affordability and qualification. Since the client did not intend to keep the home, arranging long-term financing was not the objective. The immediate issue was how to close the transaction and avoid the consequences of a failed builder closing.

6. Our Analysis

Our analysis focused on closing risk, sale exit, and prepayment flexibility. A private mortgage was the only practical structure because institutional income qualification was not available. But the mortgage had to be open because the client planned to sell the home soon after closing. A closed private mortgage could have created unnecessary prepayment penalties or made the exit more expensive. The open structure aligned the mortgage with the client’s actual plan.

7. Financing Structure

The file was structured as a short-term open private mortgage to close the preconstruction purchase. The planned exit was the sale of the property after closing, with the sale proceeds used to repay the private mortgage. Public details do not disclose the lender name, mortgage amount, rate, fees, term, property value, purchase price, down payment, or exact sale timeline.

8. Why the Solution Worked

The solution worked because the financing matched the reality of the file. The client could not afford the property long term and could not qualify through institutional lenders. The open private mortgage allowed the client to close and then repay the loan after sale without prepayment penalty. The underwriting principle is that private lending should be structured around the true exit. In a close-and-sell scenario, prepayment flexibility is central to suitability.

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