The client
A buyer closing on a $480,000 home in Kamloops, where a pre-purchase inspection turned up a decommissioned, buried oil tank — the kind of finding no A-lender will finance around until it is professionally removed, tested, and cleared. The purchase closing date was fixed, and waiting for remediation before closing was not an option, so the file needed a private lender comfortable financing against the property as it stood.
Buried oil tanks turn up often enough on older Canadian housing stock that most experienced brokers and lawyers recognize the pattern immediately from a property inspection or title search: a home built decades ago, before municipal gas service reached the area, that switched to oil heat at some point and never fully documented the tank's later removal or decommissioning.
Property
$480,000 home, Kamloops
Decommissioned buried oil tank disclosed pre-purchase
Financing problem
No A-lender will finance as-is
Until the tank is removed and the file cleared
Private bridge
65% LTV, $312,000
Interest-only, 9.95% (illustrative)
Exit plan
Conventional refinance at 80% LTV
Once remediation is documented
The mechanics of the two stages, side by side:
| Stage | Loan amount | LTV |
|---|---|---|
| Private bridge, at closing (unfinanceable) | $312,000 | 65% |
| Conventional exit, post-remediation | $384,000 | 80% |
The problem
No A-lender will register a mortgage against a property with a known, unremediated buried oil tank — the environmental and insurance exposure is exactly the kind of risk conventional lending is built to avoid until it is resolved and documented. That leaves an private lender as effectively the only path to closing on time.
This case file focuses on the financing mechanics rather than the remediation procedure itself: the specific steps, timelines and regulatory sign-offs for tank removal vary and are outside what this file states as settled. What matters for the mortgage structure is simpler — the property is unfinanceable conventionally today, and will become financeable once remediation is documented, at some cost and some carrying period in between.
A private first mortgage at 65% LTV meant the buyer needed $168,000 down on a $480,000 purchase — considerably more cash up front than a conventional 20%-down purchase would require, reflecting the private lender's own conservative advance rate against an unfinanceable property.
The numbers
The private bridge and the eventual conventional exit are two separate, sequential loans against the same property.
| The private bridge, at closing | Amount |
|---|---|
| Purchase price | $480,000 |
| Private first mortgage (65% LTV) | $312,000 |
| Down payment required (35%) | $168,000 |
| Private lender fee (2%, paid up front) | $6,240 |
| Interest-only payment, 9.95% | $2,587/mo |
The exit: conventional refinance, post-remediation
Once the tank was removed and the file cleared for conventional lending, an A-lender refinanced at 80% LTV against the same $480,000 value:
| Exit refinance | Figure |
|---|---|
| New conventional loan (80% LTV) | $384,000 |
| Private balance paid out (interest-only, unchanged) | $312,000 |
| Room left after payout | $72,000 |
The $72,000 of room covers the private lender's 2% fee, the interest carried during the remediation period, and remediation costs themselves, with some cushion remaining. The private bridge's rate, fee and LTV are all illustrative of one lender's pricing; private terms vary by lender, property and file.
Confirming the ratios were never the problem
At the exit, qualifying against the new $384,000 conventional loan at 7.15% (the minimum qualifying rate on a 5.15% contract) against $115,000 a year in income and a $500 car loan:
| Ratio | Figure | Conventional-file line |
|---|---|---|
| GDS ($2,725 P&I + $300 tax + $150 heat ÷ $9,583 income) | 33.1% | under 39% |
| TDS (adding the $500 car loan) | 38.3% | under 44% |
The solution
A submortgage broker structured the file in two clearly sequenced pieces rather than trying to solve financeability and permanence in a single loan.
The first piece was simply closing on time: a private lender comfortable with the property's condition advanced 65% of value as short-term bridge financing, with the borrower's larger-than-usual down payment covering the rest. This is the same trade-off covered generally in A lender vs. B lender vs. private lender: the Canadian spectrum, explained — private financing exists specifically for the properties and timelines conventional lenders won't touch.
The second piece was the exit strategy, planned before the private loan even closed: remediate the tank, obtain the environmental clearance and insurance documentation an A-lender would require, then refinance out at a normal conventional rate and LTV. Because the borrower's income and credit were never the issue — only the property was — the exit refinance was a straightforward approval once the file was clean.
Coordinating the private lender's advance with the remediation contractor's timeline mattered as much as either piece individually. A buyer left carrying private financing months longer than planned, waiting on a remediation contractor's schedule, pays for that delay in interest — so the broker confirmed a realistic remediation and clearance timeline with the environmental consultant before ever locking in the private loan's term length.
The outcome
The purchase closed on schedule through the private bridge, and remediation proceeded over the following months. Once cleared, the exit refinance funded at 80% LTV, paying out the private balance with $72,000 of room to spare — and the borrower's own ratios, at 33.1% GDS and 38.3% TDS, confirmed the file was always going to be an easy conventional approval once the property itself stopped being the obstacle.
BC's property transfer tax applied at the original purchase closing, on top of the down payment, and was budgeted into the initial closing-cash estimate regardless of which lender ultimately financed the property.
What to take from this file
- 01An unfinanceable property is a property problem, not a borrower problem. This file's ratios were comfortable throughout; only the tank stood between the buyer and conventional financing.
- 02Plan the exit strategy before the private loan closes, not after. Knowing the remediation and refinance path in advance is what keeps a bridge from becoming a permanent, expensive arrangement.
- 03Private LTV, rate and fee are all illustrative and lender-specific. Terms on an unfinanceable property vary widely by lender, property type and carrying period.
- 04Keep remediation mechanics generic in your own client conversations unless you have a specific, verified provincial procedure to cite. The financing structure is what a broker controls; the environmental process belongs to specialists.
- 05Budget the property transfer tax at the original closing, regardless of which lender ultimately finances the property long-term. It is due once, at the purchase, not again at the exit refinance.
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.
- ▸Property Transfer Tax Act, RSBC 1996, c. 378, ss. 3(1) and 3.01(4) — BC's property transfer tax: 1% / 2% / 3% marginal brackets.
- ▸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:
- ▸65% private LTV and 9.95% interest-only rate — private pricing varies by lender, property and term.
- ▸2% private lender fee — private lender fees vary by file.
- ▸80% exit LTV and 5.15% contract rate — rates and lender appetite move; not a quote.
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.