The client
A North Battleford household two years into a $195,000 private first mortgage, interest-only, with the same lender offering another one-year renewal at 9.99% plus a 2.0% renewal fee — the path of least resistance, since it meant no new paperwork and no new lender to qualify with.
Private first mortgage
$195,000 balance, interest-only
Two years into the private relationship
Private lender's renewal offer
9.99%, plus a 2.0% renewal fee
Illustrative; lender-specific
A-lender exit rate
5.25%
Materially lower, amortizing normally
Exit costs
$2,200, one-time
Illustrative legal, appraisal and discharge fees
Household income
$6,800/month
Combined
The problem
Renewing again felt like the safe, low-effort choice: the same lender, no new underwriting, no risk of a declined application. None of that changes what it actually costs.
What renewing again would actually cost
- ▸Renewal fee: $3,900 (2.0% of the $195,000 balance)
- ▸A full year of interest at 9.99%: $19,480
- ▸Total first-year cost: $23,380 — with the full $195,000 still owing at the end of it, since the loan is interest-only
Every year renewed on this pattern repeats the fee and the rate gap; nothing about staying private moves the balance down, because none of the payment is principal.
The numbers
Pricing the exit strategy the same way — in dollars for the coming year, not just in headline rate — made the comparison a fair one.
| The A-lender exit, priced the same way | Amount |
|---|---|
| Private balance carried forward | $195,000 |
| One-time exit costs (legal, appraisal, discharge) | $2,200 |
| A-lender contract rate | 5.25% |
| Minimum qualifying rate (greater of contract + 2% or 5.25%) | 7.25% |
| First-year cost, compared | Renew private again | Exit to an A-lender |
|---|---|---|
| One-time fee | $3,900 renewal fee | $2,200 exit costs |
| A year of interest on $195,000 | $19,480 at 9.99% | $10,238 at 5.25% |
| Total first-year cost | $23,380 | $12,438 |
$10,942 separates the two paths in year one alone, and the gap repeats every year the private renewal pattern continues, since the interest-only balance never shrinks on its own.
The A-lender mortgage, qualified
| Ratio check on the exit | Figure |
|---|---|
| Qualifying payment, 23 years | $1,441 |
| Property tax + heat | $380 |
| TDS on $6,800/mo combined income | 31.2% |
The solution
The broker priced both paths in dollars before recommending either one.
First, quantified what renewing again would actually cost — the fee and a full year of interest, added up, rather than judged by the rate alone.
Second, priced the exit the same way, including the one-time costs of leaving, so the comparison was dollars against dollars, not a rate against a hassle.
Third, confirmed the A-lender mortgage actually qualified before recommending the exit, since a lower rate is only useful if the household can be approved for it.
There is a real trade-off worth naming honestly: renewing private is genuinely less paperwork, and for a household not ready to be underwritten again, that has value. But every private deal needs an exit strategy, and "renew again" is not one — it is the absence of one, repeated annually at a real cost.
The outcome
The household exited to the A-lender rather than renew. TDS on the new mortgage came to 31.2%, and the exit saved $10,942 in the first year alone — a saving that repeats every year the rate gap between the two lenders persists, on top of a mortgage that now pays down principal instead of standing still.
Because this is a refinance of an existing property, no transfer tax applies in any province. The $2,200 in exit costs and this file's regulatory figures are the only numbers this outcome relies on.
What to take from this file
- 01"Renew again" is the path of least resistance, not a plan. A private renewal without a stated end date simply repeats the same cost every year.
- 02Price a renewal the same way you'd price an exit — in dollars for the coming year, not just in rate. $23,380 versus $12,438 is a comparison a headline rate alone doesn't show.
- 03An interest-only private balance never shrinks on its own. Every year renewed is a year the full principal is still owing at the end of it.
- 04Confirm the A-lender exit actually qualifies before recommending it. A lower rate is only a saving if the household can be approved for it.
- 05Every private deal needs an exit strategy named at the outset, not decided year by year at renewal time. Deciding it late still works, but it costs a renewal fee and a year of the rate gap to get there.
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:
- ▸9.99% private renewal rate / 5.25% new A-lender rate / 2.0% renewal fee — private-lender renewal pricing and fees are set lender by lender, not by a published rule.
- ▸$2,200 in exit costs — legal, appraisal and discharge fees vary by lawyer and lender; illustrative only.
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.