How private lenders actually assess equity.

Income-based underwriting, the model behind GDS and TDS ratio checks, asks whether the borrower's cash flow can carry the payment over the life of the loan. Equity-based underwriting asks a narrower question: if the borrower stops paying, is there enough value in the property to recover the loan, sale costs, and accrued interest through a forced sale?

That's why a private lender can approve a file an A lender declines on income grounds, and why the same file can still get declined by a private lender if the equity cushion is too thin — the risk lens is different, not absent. A borrower with excellent, well-documented income but very little equity in the property is often a harder private approval than a borrower with thin income documentation but a large equity cushion, which is the reverse of how an A lender would rank the same two files.

See GDS and TDS, worked for how the income side is calculated when it does apply.

This also explains why private lending appears in such different client situations. A retiree with a fully paid-off home but modest, hard-to-document pension income and a self-employed contractor mid-way through a strong but unproven first year can both be strong private candidates, for the same underlying reason — plenty of equity, a repayment story an A lender's income formulas can't yet capture.

The trade-off is worth naming plainly to the client too: an equity-first approval can move faster and forgive documentation gaps an income-first lender won't, but it also means the property itself, not the client's ability to earn their way out of trouble, is what actually secures the loan.

That framing is worth repeating whenever a client seems to be comparing a private approval to a bank approval as if they were the same kind of decision made by the same kind of lender — they're answering different questions, and the client's own financial story matters differently to each one.

The appraisal, not the purchase price, the listing price, or the client's own estimate, sets the value a private lender lends against. Most private lenders order or require their own appraisal rather than relying on one commissioned for an earlier transaction, precisely because the loan-to-value calculation only means something if the value behind it is current and independent.

On a second mortgage, what matters is combined loan-to-value: the existing first mortgage balance plus the new private loan, measured against the appraised value — not just the new loan on its own. A property with a large first mortgage already in place has much less room for a private second than the same property with little or no existing debt, even if the two properties have identical appraised values.

This is also why a broker should confirm the appraisal type a lender expects before ordering one. A full appraisal with an interior inspection is standard for most private files, but some lenders on lower-loan-to-value deals will accept a drive-by or desktop valuation — confirming which one avoids paying for a report the lender won't actually rely on.

Yes — credit and income still get reviewed, but as a check on the exit plan rather than the primary approval driver. A private lender wants to know the borrower has a plausible path to repay or refinance before the term ends, and will look harder at a file with no visible income at all than one with imperfect but real income.

• →Marketability of the property — a private lender wants to know it could actually be sold within a reasonable window if it came to that.
• →Property insurance in place and current.
• →Clear or explainable title, with any liens or encumbrances accounted for.
• →A credible story for the exit — sale, refinance, or resolved income — even if it isn't the primary approval factor.

Property type and location also feed into how a private lender reads the equity cushion — a well-located, easily marketable property supports a higher combined loan-to-value than a rural or highly specialized property that would take longer to sell in a forced-sale scenario, even at an identical appraised value on paper.

Lead with the equity story: current appraised value, existing charges, combined loan-to-value, and comparable sales if the appraisal is being ordered fresh. Income and credit still belong in the file, but as supporting context for the exit, not as the headline. A private lender who has to dig for the loan-to-value math is a slower approval, not a declined one, but slower matters when the whole point of a private file is speed.

Treadstone's underwriting support packages equity-driven files the way private lenders actually read them, so approvals move at the speed the client needs.

It affects how the equity assessment gets applied in practice, even though the underlying loan-to-value logic stays the same. An individual private lender may underwrite a single file on instinct built from years of similar deals, while a mortgage investment corporation typically applies a documented, board-approved lending policy with fixed loan-to-value ceilings the underwriting team can't exceed regardless of how compelling a particular file looks.

A MIC must meet its own structural requirements to keep its tax treatment under the Income Tax Act — at least 20 shareholders, no single shareholder holding more than 25% of its capital, and at least half its assets in residential mortgages or insured deposits — which is part of why a MIC's lending policy tends to be more rigid and consistently applied than an individual lender's file-by-file judgment. Knowing which type of lender is reviewing a file helps a broker predict how much room there is to negotiate loan-to-value or term once the equity story is on the table.

A syndicate, where several private investors fund portions of the same mortgage, sits somewhere between the two — the underwriting is usually coordinated by a single administrator applying a consistent policy, but the file may need sign-off from multiple parties before terms are finalized, which can add a few days to the timeline compared with a single individual lender making the call alone.