Paid on commission, priced on the average

His own bank looked at two years of T4s showing very different numbers and did the conservative thing: it qualified him on base salary plus only the commission he had actually earned so far in the current year, treated as a hard floor against a slower quarter ahead. On paper that looks prudent. In practice it manufactured a decline out of a borrower whose income, averaged properly, easily supported the purchase.

Ontario’s FSRA licensing rules don’t dictate how a lender reads commission income — that’s underwriting policy, and it varies. But the standard practice across CMHC-insured lending, and the one that actually reflects how commission income behaves over time, is a two-year average of total T4 earnings, documented against the matching Notice of Assessment for each year — not a snapshot of whichever months happened to be leanest, a distinction covered in full in how lenders actually average commission income.

At 10% down this is an insured file, so GDS 39% and TDS 44% are hard caps set by the insurer, not a lender’s internal comfort setting. The $454,671 total mortgage sits close to what average new mortgage amounts across Canada look like for a first-time buyer.

Contract rate — 5-year fixed (illustrative, not a quote): 4.39%. Minimum qualifying rate — greater of contract + 2% and 5.25%: 6.39%. Monthly P&I at the qualifying rate, the figure the ratios actually run on: $3,015. Payments computed the Canadian way — rate compounded semi-annually, paid monthly, 25-year amortization — and rounded to the nearest dollar; ratios computed on the displayed dollar figures and rounded to one decimal.

GDS — two ways to read the same commission income

TDS — confirming there’s still room after the debts

An FSRA-licensed Ontario mortgage agent re-ran the file the way CMHC-insured lending is actually meant to be qualified.

First, diagnosed the decline as a methodology problem, not an income problem. The bank hadn’t found a reason to doubt him — it had simply chosen the most conservative of several defensible ways to average variable income, and that choice alone manufactured a 55.9% GDS out of a file that, averaged properly, wasn’t close to the ceiling.

Second, rebuilt the income on the standard two-year average. Two full years of T4s, matched to the corresponding Notices of Assessment, established $108,000/yr as the documented, defensible figure — not an estimate, an average of two completed tax years. A short employer letter confirmed the base-plus-commission structure hadn’t changed and that he remained in the same role.

Third, packaged the down payment with its own paper trail. Part of the $49,000 came from FHSA contributions and part from a Home Buyers’ Plan withdrawal against his RRSP — both legitimate first-time-buyer tools, and both need their own statements alongside the usual 90-day history so the insurer sees exactly where the money came from, not just that it arrived.

For a two-year commission average, how the split between base and variable pay gets treated is a lender-by-lender question — some run it exactly this way, some average only the commission portion, some ask for a letter projecting the year ahead, a spread illustrated well in a two-year-average file worked start to funded. This file simply found a lender applying the version that reflects how the income actually behaves over time.

Approved and funded: insured at 90% LTV, 25-year amortization, first-time buyer. The closing-cash math still had to be right, on top of the $49,000 down payment:

The RST is a cash-only cost even though the premium itself is capitalized into the mortgage — a detail worth flagging early so it isn’t a surprise the week of closing.

• 01Know which averaging method your lender defaults to before you submit. A year-to-date snapshot and a two-year T4/NOA average can produce wildly different GDS results on the identical file — 55.9% versus 38.3% here. Run both before choosing where the file goes.
• 02Two years of T4s plus matching Notices of Assessment is the standard proof for variable income. It documents an average, not an estimate, which is exactly what a conservative underwriter is looking to see.
• 03Ontario’s first-time-buyer LTT refund has a hard ceiling. The $4,000 maximum fully covers the tax on homes up to roughly $368,000 — above that, as here, it only offsets part of the bill.
• 04RST on the default-insurance premium is cash, always. It cannot be capitalized into the mortgage even though the premium itself can — budget it as a separate line, not folded into the down payment math.
• 05A conservative income read is a policy choice, not a verdict. The second lender didn’t take on more risk; it simply measured the same income differently, and correctly.