The client
A homeowner in Miramichi took out a $195,000 private first mortgage against a property that appraised at $260,000 when the loan funded. At exit, with the private term maturing, the local market had softened enough that a new appraisal came in materially lower.
Original appraisal
$260,000
At private-mortgage origination
Exit appraisal
$232,000
Reflecting a softer local market
Private payout balance
$195,000
Due at exit
Household income
$6,800/mo
Other debt $280/mo
Savings available
$20,000
To cover any shortfall in cash
The problem
A new lender sizes its loan against today's value, not the value the private mortgage funded against. Loan-to-value is calculated on the exit appraisal, and that appraisal had moved against this file.
The gap, in one line
- ▸New lender's maximum loan, 80% of the $232,000 exit appraisal: $185,600
- ▸Private payout balance owed: $195,000
- ▸Shortfall the household must cover from another source: $9,400
The client's first instinct was to assume a second private lender would simply cover the difference. That path exists, but it replaces one exit problem with a new, smaller private mortgage that will eventually need its own exit — not a fix, just a postponement.
The numbers
The new lender's loan is sized to the lower of the two values in play here — and in a private-to-A-lender exit, that number is what actually governs how much cash has to come from somewhere else.
| Sizing the exit against the lower appraisal | Amount |
|---|---|
| Exit appraisal | $232,000 |
| New lender's maximum loan (80% LTV) | $185,600 |
| Private payout balance owed | $195,000 |
| Shortfall to cover in cash | $9,400 |
| Rate & payments | Figure |
|---|---|
| Contract rate, new A-lender (illustrative, not a quote) | 5.35% |
| Minimum qualifying rate | 7.35% |
| Monthly P&I at the qualifying rate | 1,340 |
| Monthly P&I at the contract rate | 1,117 |
| TDS on the new loan | Figure |
|---|---|
| Housing costs (P&I + tax + heat) | 1,690 |
| TDS | 29.0% |
After covering the $9,400 shortfall from the $20,000 available, the household has $10,600 left in savings — the exit closed, but it used real cash, not paper equity that turned out not to be there.
The solution
An FCNB-licensed mortgage broker treated the shortfall as a cash-planning problem to solve directly, not a reason to look for another private lender.
First, confirmed the shortfall in writing once the exit appraisal came back, rather than waiting to discover the gap at the lawyer's table.
Second, closed the $9,400 gap from the household's own $20,000 in savings, keeping the exit to a single, permanent A-lender mortgage rather than layering in a new private loan to bridge it.
The outcome
The exit closed on the new lender's $185,600 loan, with the $9,400 gap covered in cash and $10,600 left in savings afterward. TDS on the smaller loan settled at 29.0%.
Because this is a refinance with no change of ownership, New Brunswick's real property transfer tax does not apply here.
What to take from this file
- 01A private mortgage's original appraisal is not a guarantee for the exit. Local values can move against a file between funding and maturity.
- 02A new lender sizes its loan to today's value, not the original one. Loan-to-value is recalculated at exit, every time.
- 03A second private lender can bridge a shortfall — but it usually just postpones the same exit problem. Ask what the new loan's own exit will look like before recommending it.
- 04Confirm a shortfall in writing before waiving conditions. Finding it at the lawyer's table leaves no time to plan around it.
- 05A refinance never triggers provincial transfer tax. Only a change of ownership does.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸5.35% contract rate — rates move daily; not a quote.
- ▸the 80% maximum LTV — each uninsured lender sets its own maximum loan-to-value for a refinance; illustrative here, not a universal rule.
- ▸the 44% comfort reference — this file is uninsured, so there is no CMHC ratio ceiling -- 44% is a common internal comfort line, not a regulatory cap.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.