Two years in private, one route out

Interest-only private financing is a legitimate short-term bridge; it stops being one when nobody prices the exit. Twenty-four months of $1,953-a-month payments moved zero dollars of principal — a pattern that shows up directly in Canada’s mortgage arrears data when borrowers stay on a private treadmill without ever pricing a way off it.

Part of the reason nobody priced the exit sooner is that a private renewal is easy to sign and hard to question — the paperwork shows up, the payment stays the same shape, and there is no natural moment that forces a borrower to ask what two more years of the same arrangement will actually cost. The private lender has no obligation to raise that question, and often no incentive to either.

The two-year cost of the private stack, set against the refinance that finally replaced it.

The exit, priced

Provincially regulated credit unions are not bound by OSFI’s federal rules the way banks are; this one chose to test affordability with the same greater-of qualifying-rate approach as a matter of its own sound-lending policy, not because it was required to.

That policy choice cuts both ways for a broker shopping a post-proposal file. A credit union under no obligation to apply the federal qualifying rate could just as easily decide not to test the file at all against any stress-rate benchmark, and either approach is defensible underwriting on its own terms. Confirming which posture a given credit union actually takes, rather than assuming either one, is part of what the broker does before a file is submitted, not after it comes back with questions.

A mortgage broker licensed under Newfoundland and Labrador’s Superintendent of Mortgage Brokerages and Mortgage Brokers did three things.

First, priced the treadmill in dollars. $46,872 paid with zero principal reduction over two years made the cost of “just renew again” concrete rather than abstract, and reframed the conversation as an exit strategy question rather than a rate-shopping one.

Second, assembled proof the proposal had seasoned — the completion certificate plus 24 months of on-time private payments, the specific bar this receiving lender wanted (illustrative; every lender sets its own).

Third, placed with a credit union whose adjudication policy was built to work with a seasoned post-proposal file — the kind of flexibility credit unions can offer where federal B-20 rules don’t directly apply.

The monthly cost dropped from $1,953 interest-only to $1,408 amortizing — and, for the first time in two years, part of every payment reduces the balance. Refinance closing costs (appraisal, legal, discharge fees) are lender- and file-specific and were budgeted separately, without a firm province-wide figure to cite. A written plan of this kind is exactly what our private exit strategy planner is built to walk through before the maturity date arrives, not after.

The borrower’s own sense of the file had been that private financing was simply what his situation cost, indefinitely, because of the proposal in his past. What actually changed his rate wasn’t a rule that expired on a fixed date; it was a lender that was willing to look at 26 months of clean payment history and a completed proposal, and price the file on what it showed rather than on what it used to say.

• 01Sitting on a maturing private is a principal problem, not a rate problem. Quantify the total interest paid across the term ($46,872 here, none of it reducing the balance) before defaulting to “just renew.”
• 02Provincially regulated credit unions set their own adjudication policy. They aren’t bound by OSFI’s federal B-20 rules the same way banks are, which can make them a better fit for a seasoned post-proposal file.
• 03A lender’s seasoning bar — “24 clean payments,” or whatever it specifies — is that lender’s own policy, not a universal rule. Confirm the actual number with the receiving lender.
• 04An amortizing payment can beat an interest-only one on real cash flow even at a higher qualifying rate. Model both, not just the headline number.
• 05Newfoundland and Labrador’s mortgage-broker regulation changed under a new 2023 Act, in force since April 2025. Cite the current regulator and Act, not the repealed one.