The client
A self-employed electrician building his own home in Quebec City, doing the wiring himself and hiring trades for the rest. The construction-to-permanent mortgage closed once the home's fair market value was established at substantial completion, the trigger point for both housing rebates.
Fair market value at substantial completion
$335,000
Down payment
$67,000 (20%)
Mortgage
$268,000 conventional
Rebates claimed
Federal GST rebate: full. Provincial QST rebate: none.
The problem
The original closing-cost budget assumed both rebates would land -- the federal GST New Housing Rebate and Quebec's own QST equivalent, treated as a single line item because they're calculated the same way, on the same trigger date. They aren't the same program, and they don't phase out on the same schedule.
Two rebates, two different ceilings
- ▸Federal — Excise Tax Act §256, owner-built rebate: full rebate (36% of the GST paid, capped at $6,300) for a fair market value up to $350,000, phasing out on a straight line between $350,000 and $450,000, nil above that
- ▸Quebec — the QST's own New Housing Rebate under the Act respecting the Québec sales tax: full rebate (50% of the QST paid, capped at $9,975) only up to $200,000, phasing out on a straight line between $200,000 and $300,000, nil above that
- ▸A fair market value between $300,000 and $350,000 clears the federal ceiling in full while the provincial rebate has already reached zero — the two programs simply don't share a phase-out band
The home's fair market value at substantial completion came in at $335,000 -- squarely inside the federal program's full-rebate band, and $35,000 past the point where Quebec's own rebate stops paying out anything at all. The closing-cost budget had modelled the maximum $9,975 QST rebate as a certainty, not a possibility.
The numbers
This is a conventional mortgage at 80% loan-to-value -- the math below is the rebate mismatch itself, and its effect on the cash needed to close.
| The two rebates at $335,000 fair market value | Amount |
|---|---|
| Federal GST rebate (1.8% of FMV, full rebate under $350,000) | $6,030 |
| QST rebate assumed in the original budget | $9,975 |
| QST rebate actually available (FMV over $300,000 ceiling) | $0 |
| Cash shortfall against the original budget | $9,975 |
The mortgage
| Sizing and ratios | Figure |
|---|---|
| Mortgage ($335,000 − $67,000 down) | $268,000 |
| Minimum qualifying rate — greater of contract + 2% and 5.25% | 7.19% |
| Monthly payment at the qualifying rate | $1,909 |
| Monthly payment at the 5.19% contract rate | $1,588 |
| GDS (qualifying payment + $210 tax + $120 heat) ÷ income | 31.1% |
| TDS (housing + $150 other debt) ÷ income | 33.2% |
The solution
The broker recalculated both rebates against the appraiser's fair-market-value estimate as soon as it came in, rather than waiting for the client's accountant to file the actual rebate applications after closing.
Once the $9,975 gap was clear, the client's own savings covered it directly -- there was no way to reduce the fair market value to requalify for the provincial rebate without under-declaring the build, which was never on the table.
This file did not claim any GST/QST New Housing Rebate clawback or repayment issue -- that is a separate condition (occupancy or use changing after the rebate is paid) and doesn't apply here.
The outcome
The mortgage funded at $268,000, qualifying payment $1,909, GDS 31.1% and TDS 33.2%. The federal GST rebate of $6,030 was confirmed and factored into the client's post-closing cash flow; the $9,975 the budget had assumed from the provincial side was replaced with the client's own funds, identified three weeks before closing instead of discovered after it.
What to take from this file
- 01The federal GST rebate and Quebec's QST rebate are two separate programs with two separate ceilings. Full federal rebate runs to a $350,000 fair market value; Quebec's own rebate is fully phased out by $300,000 -- a $50,000 gap where one pays and the other doesn't.
- 02Confirm both thresholds against the appraiser's fair-market-value figure, not the build budget's own cost estimate. The rebate trigger is fair market value at substantial completion, which can land in a different band than the construction cost alone suggests.
- 03Never assume a matched pair of federal/provincial programs share a phase-out band. Treat each rebate's threshold as its own fact to verify, not as a single combined line item.
- 04A rebate shortfall found before closing is a budget line; found after closing, it's a client complaint. Recalculate both rebates the moment a fair-market-value estimate exists.
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%.
- ▸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:
- ▸5.19% contract rate — rates move daily; not a quote.
- ▸$210 property tax / $120 heat / $150 other debt — illustrative carrying costs for this file.
- ▸$335,000 fair market value — an illustrative deal figure chosen to sit inside the federal band and past the provincial one; not a published average.
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.