The Situation
The client, single, owns a detached house on a large lot in Metro Vancouver assessed at about $1.49 million, with suites renting for about $5,030 a month and a credit-union first mortgage of only about $225,000. Years of living beyond their means had brought the credit score to 497 by late 2023, with past-due property tax, a judgment, and a certificate of pending litigation registered on title by a buyer after the client backed out of an accepted sale in 2021 as prices climbed; the lawyers had since settled it.
The Challenge
A certificate of pending litigation blocks any conventional lender until it is discharged, a 497 score blocks the rest, and the client's income had not been documented through filed tax returns, so the file could not be qualified on income at all. By March 2024 the score had already climbed to 594 on the client's own effort to pay balances down, but the title had to be cleared and the arrears paid before anything else could happen.
The Solution
We placed a private second mortgage of about $130,000 behind the first, interest only on a one-year closed term, with the interest for the entire term held back from the proceeds as a reserve so no payment could be missed. The proceeds paid the past-due property tax, the secured and unsecured debt, the settlement that discharges the certificate of pending litigation, and about $35,000 for a fence the property needed. The lender lent on the equity, more than $1.2 million of it, and the rental income, not on a tax return.
The Outcome
A clean title, no arrears, the debts gone, the fence funded, and twelve months of payments made in advance while the client files the outstanding tax returns. The exit, written into the file, is a refinance of both mortgages with a bank or an alternative lender in a year, once the returns are filed and the score has had time to finish recovering.