Key takeaways
- →This is a composite, illustrative scenario for teaching purposes — not a real Treadstone client file.
- →Commissioned employees, though T4'd, often see their income averaged similarly to self-employed borrowers because it varies meaningfully year to year.
- →A single weak year sitting inside the two-year window a lender looks at can pull the average down even when the trend on either side of it is clearly recovering.
- →Some lenders retain discretion to weight a documented, one-time anomaly differently than an unexplained decline — but this isn't guaranteed across the market, and depends on each lender's own income policy.
This is an illustrative, composite scenario — not a real client file — built to show how a commissioned borrower's income gets read when one year in the averaging window is genuinely weaker than the years around it.
Say a manufacturer's sales representative earns almost entirely commission, with a compensation structure that hasn't changed in years. Two years ago, his largest account was lost industry-wide when the client consolidated suppliers — nothing specific to his performance, just bad timing. That year's income fell sharply. The following year, with a new account replacing the old one, income rebounded well past where it started.
01 · What did this borrower's two-year picture look like?
Two Notices of Assessment told two very different stories: a weak year followed by a strong one, averaged together into a number that understated both his current earning capacity and the specific, one-time reason behind the dip.
The underlying framework a lender applies here is the same general capacity assessment described in OSFI Guideline B-20 — sound underwriting means assessing a borrower's actual capacity to service the debt, not applying a mechanical average without context where a documented explanation exists.
02 · Why didn't the strong recent year simply carry the file?
Most lenders averaging commission income over two years don't simply take the higher year and move on — the weaker year still counts, and counts fully, unless the file gives the underwriter a specific, verifiable reason to read it differently.
Submitted with no context, the file read as volatile income with an uncertain trend — exactly the kind of picture that invites a conservative, lower qualifying number, or a request for more information before the lender will proceed at all.
03 · How did the file get repackaged to tell the real story?
- →A letter of explanation naming the specific account lost, the industry-wide consolidation behind it, and the date the replacement account came on.
- →Current-year T4 and recent pay statements showing the recovery has held for a full subsequent period, not just a single strong quarter.
- →An employer letter confirming the compensation structure itself hasn't changed — this wasn't a raise or a new role, just a client roster that recovered.
- →A short note flagging that the weak year had a specific, documented, external cause, distinct from an unexplained decline in performance.
Variable income, documented properly
One weak year doesn't have to define the whole average.
Treadstone's fulfillment associates build the documented explanation for any outlier year into commission and self-employed files alike, before a lender has a chance to read it as unexplained risk.
04 · How did the lender end up treating the file?
With the documented explanation in place, the lender reviewed the file as an explained anomaly rather than an ambiguous decline. Some lenders, when a dip is fully documented this way, retain the discretion to weight the more recent, sustained trend more heavily than a flat average would suggest — though that discretion, and how far a given lender is willing to use it, varies by lender and is never something a broker should promise in advance.
In this file, the documentation was enough to move the conversation from “why did this drop?” to “here's why it dropped, and here's the proof it's resolved” — which is the entire difference between a file that stalls and one that moves.
05 · What does this file teach about variable-income borrowers generally?
Commissioned income and self-employed income get treated very similarly by most lenders for exactly this reason — both vary year to year, and both benefit enormously from a documented explanation attached to any outlier year, rather than leaving the underwriter to guess at the cause.
The specific tools for building that documentation — the letter of explanation, the current-year evidence, the employer or accountant confirmation — are the same discipline covered in our self-employed income calculation worksheet, even for a borrower who is technically a T4'd employee.
Frequently asked questions
This article is general information to help you scale — not a substitute for tailored advice on your specific business, licensing, or compliance obligations. All figures are illustrative examples for planning purposes; actual costs vary by province, market, and brokerage.