Client overview
Client Situation Overview
The Thompson family owns a duplex in Montreal, occupying one unit and renting out the other. Facing urgent winter preparations due to needed roof repairs and window and door replacements, they risked losing their home after missing two mortgage payments. With substantial equity in their property but unable to secure traditional financing, they sought a solution to keep their home and make necessary renovations.
Challenges Faced
- Mortgage Arrears: Missed two mortgage payments leading to the bank initiating foreclosure proceedings.
- Urgent Renovations Needed: Roof repairs and window and door replacements required before winter to ensure livability and tenant safety.
- Credit Challenges: Recent missed payments negatively impacted their credit score, limiting access to traditional and B lenders.
- Risk of Losing Home: High equity but insufficient cash flow to cover immediate expenses; unwilling to sell and downgrade.
- Need for Co-Signer: Working on obtaining a co-signer to strengthen their loan application.
Client Profile
Name: The Thompson Family
Age: 45 (Mr. Thompson), 43 (Mrs. Thompson)
Industry/Occupation: Mr. Thompson – Construction Worker; Mrs. Thompson – Part-Time Retail Associate
Location and Address: Montreal, Quebec
Age: 45 (Mr. Thompson), 43 (Mrs. Thompson)
Industry/Occupation: Mr. Thompson – Construction Worker; Mrs. Thompson – Part-Time Retail Associate
Location and Address: Montreal, Quebec
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Financial and Lending Details
Loan Purpose and Goals:
Purpose of the Loan
To consolidate mortgage arrears and finance urgent winter renovations (roof repair, windows, and doors replacement).
Client's Goals
- Avoid foreclosure and retain ownership of their home.
- Complete essential winter renovations to ensure safety and comfort.
- Improve financial standing to refinance with a traditional lender in the future.
Expected Benefits
- Protect property value and prevent further damage.
- Maintain rental income from tenant occupancy.
- Restore credit standing through consistent loan repayments.
Credit and Financial Health:
Credit Score
- Mr. Thompson: 620
- Mrs. Thompson: 630
Credit History
Recent late payments on mortgage and credit cards due to unexpected medical expenses; previously maintained good credit history.
Monthly Income
- Combined Employment Income: CAD 6,000
- Rental Income: CAD 500
- Total Monthly Income: CAD 6,500
Financial and Property Details:
Portfolio Value
CAD 600,000
Loan-to-Value (LTV) Ratio
- Existing Mortgage: CAD 300,000 (50% LTV)
- New Loan Amount: CAD 100,000
- Total LTV after new loan: 66.7%
Current Condition of Property
- Roof in disrepair, causing leaks.
- Old windows and doors leading to energy inefficiency and drafts.
- Urgent need for repairs before the onset of winter.
Appraised Value
CAD 640,000 (as per recent appraisal)
Existing Debts and Obligations
- Mortgage Arrears: CAD 5,000 (2 missed payments)
- Remaining Mortgage Balance: CAD 300,000
- Credit Card Debt: CAD 15,000
Other Funding Sources
Potential co-signer: Mrs. Thompson's brother, who has agreed to support their loan application.
Lending Solution
Lending Strategy and Loan Details
Amount Financed
CAD 100,000
Repayment Plan
- Interest-only payments of approximately CAD 1,082.50 per month for 12 months.
- Plan to refinance with a traditional lender after credit improvement.
Loan Term
12 months, with an option to renew
Interest Rate
12.99% per year (annum)
Monthly Payment Amount
Interest-Only Payment = (CAD 100,000 * 12.99%) / 12 ≈ CAD 1,082.50
Return on Investment (ROI)
Not applicable for borrower; focus is on retaining property and financial stabilization.
Implementation Process
Approval Process Steps
1. Initial Consultation: Assessed financial situation, property equity, and renovation needs.
2. Documentation Collection: Collected income proofs, mortgage statements, and appraisal reports.
3. Property Evaluation: Confirmed substantial equity and potential increase in value post-renovation.
4. Underwriting: Evaluated risk with consideration of co-signer's credit and property equity.
5. Approval and Funding: Provided conditional approval; funded loan within 10 business days.
Funding Timeline
Total time from application to funding: 10 business days.
Customized Solutions
- Interest-Only Payments: Lowered monthly payments to improve cash flow.
- Arrears Consolidation: Addressed mortgage arrears to halt foreclosure.
- Flexible Terms: Option to renew loan term if needed.
Results and Impact
Results achieved
Products used: Private Second Mortgage Loan – A secured loan leveraging the property's equity, providing funds to cover arrears and renovations, positioned behind the primary mortgage.
Interest-Only Loan Structure – Allows for lower monthly payments by paying only interest, with principal repayment deferred to loan maturity, aiding cash flow management during financial recovery.
Apply Now!Interest-Only Loan Structure – Allows for lower monthly payments by paying only interest, with principal repayment deferred to loan maturity, aiding cash flow management during financial recovery.
Achievement of Client Goals
- Prevented foreclosure by paying off arrears.
- Completed essential winter renovations.
- Maintained rental income from tenant.
- Retained ownership of their home without downgrading.
Impact on Financial Position
- Improved cash flow due to interest-only payments.
- Increased property value post-renovation.
- Enhanced credit profile with consistent payments.
Conclusion
Let's recap
By offering a CAD 100,000 private second mortgage at 12.99% interest with interest-only payments, we enabled the Thompson family to avoid foreclosure, complete urgent winter renovations, and stabilize their financial situation without selling their home.
This case highlights our ability to provide flexible lending solutions tailored to clients facing urgent financial challenges, demonstrating the value of private lending when traditional financing is not accessible.
This case highlights our ability to provide flexible lending solutions tailored to clients facing urgent financial challenges, demonstrating the value of private lending when traditional financing is not accessible.
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