The Situation
The clients, a married couple with three children, own a construction-management company that has operated since 2007 and grosses over $6 million a year, with profits flowing to a holding company that pays them. They were weeks from completing a five-bedroom secondary home near a mountain resort: about half a million for the lot and another half million to build it, with no mortgage on it. They also own their primary residence in Metro Vancouver, worth around $3.5 million.
The Challenge
The company's next project needed an empty lot, and the clients wanted to buy it without touching the primary residence or the business's own paid-off credit line. The cleanest source was the equity in the new house, but they wanted the house held by the holding company rather than personally, which most lenders treat as a corporate borrower rather than a homeowner. The income was corporate, flowing through two companies and a family trust, not a T4.
The Solution
We structured the purchase as a sale from the clients to their own holding company, with the equity as the down payment: 40% in, 60% borrowed. An alternative lender's stated-income program read the holding company's financials, about $600,000 of income with roughly $525,000 net on the interim statements, and advanced a $400,000 first mortgage on a three-year fixed term plus a $620,000 home equity line of credit, both secured on the recreation home. The $400,000 funds the lot purchase; the line of credit sits undrawn as a safety net behind the build, alongside the company's existing $400,000 business line.
The Outcome
The holding company owns the recreation home, the operating company has the lot for its next detached house to sell, and $620,000 of standby credit sits behind the project at a line-of-credit rate rather than construction-loan pricing. Nothing was borrowed against the primary residence, and the family keeps the recreation home long term.