The Situation
The clients, a married couple in Alberta, own their home and a rental house worth about $1.05 million that carries a bank first mortgage of about $366,000 and rents for about $3,950 a month. One client spent most of a year overseas with a parent who was seriously ill, and the household's income fell just as interest rates rose and their payments jumped, while most of their money was being reinvested in the business one of them owns. Accounts at one bank fell behind, then the city property taxes.
The Challenge
About $338,000 of debt in all, roughly $67,000 of it delinquent at one bank and about $10,500 of property tax in arrears, with collections on both credit files and scores of 557 and 542. The incomes were real, a salaried position at about $94,500 plus a company grossing about $450,000 a year, and a new job for the other client, but no bank reads a file like this until the arrears are gone and the scores have moved.
The Solution
In early 2024 we placed a private second mortgage of about $359,000 behind the bank first on the rental house, open, at about 13% on a 35-year amortization, bringing the total borrowing on it to about 69% of value. The proceeds paid the property-tax arrears and the delinquent accounts in full and paid every remaining balance down below 30% of its limit, which is where credit scores start to climb. The exit is written in: the first mortgage matures in about a year and a half, and either then or in about six months, once the scores have recovered, both mortgages are refinanced together on an alternative lender's stated-income program using the business income.
The Outcome
No arrears, no delinquent accounts, every card under a third of its limit and a tenant still paying the rent. A private second mortgage does the clean-up that a stated-income refinance cannot do yet, and leaves the bank first mortgage, and its rate, exactly where they were.