The client
A client near Sherbrooke owned a building lot free and clear, inherited debt-free years earlier, and wanted to self-build rather than buy an existing home — a pattern that shows up wherever housing-starts data shows resale inventory running thin. With no cash down payment saved, the land itself had to carry the equity side of the file.
Land
$96,000
Owned free and clear, no down payment saved
Construction budget
$384,000
Released in four draws
Total project value
$480,000
Land plus completed build
Household income
9,600/mo
Existing debt payment 300/mo
Structure
5.99% permanent term at completion
25-year amortization, illustrative
The problem
A standard purchase file has a cash down payment to verify with 90 days of statements. This file had none — the entire equity side of the transaction was the land, and the lender had to be structured around that from the start rather than treating the absence of cash as a shortfall to explain away.
Where the equity actually sits
- ▸Land value (owned outright): $96,000
- ▸Construction commitment: $384,000
- ▸Total project value: $480,000 — land supplies exactly 20% of it
The numbers
The lender qualifies the borrower for the full construction commitment up front, before the first draw releases — not draw by draw.
| The four-draw schedule | Amount |
|---|---|
| Draw 1 — excavation and foundation | $96,000 |
| Draw 2 — framing and lock-up | $96,000 |
| Draw 3 — drywall and mechanical rough-in | $96,000 |
| Draw 4 — final completion | $96,000 |
| Total construction commitment | $384,000 |
| Rate & payments | Figure |
|---|---|
| Contract rate on the permanent term (illustrative) | 5.99% |
| Minimum qualifying rate | 7.99% |
| Monthly P&I at the qualifying rate | 2,928 |
| Monthly P&I at the contract rate | 2,455 |
| Ratio | Figure |
|---|---|
| GDS | 35.1% |
| TDS vs. the 44% benchmark | 38.2% ✓ |
The solution
The courtier hypothécaire on the file structured the land as the equity position from the outset rather than presenting the absence of cash as a gap to close.
Had the land independently appraised at $96,000, establishing it as a clean substitute for a cash down payment against the $480,000 total project value.
Set the draw schedule against completed-stage inspections rather than a fixed calendar — foundation, framing and lock-up, drywall and mechanical rough-in, and final completion — so funds only released once the work they paid for was actually in place.
The outcome
Qualified and committed for the full $384,000 construction facility up front, with the land carrying the entire equity position and each draw tied to its own inspection.
What to take from this file
- 01Land equity can substitute for a cash down payment entirely when it’s independently appraised and owned free and clear.
- 02Qualify the borrower for the full commitment, not draw by draw. The lender is on the hook for the whole facility from the first advance.
- 03Inspection-tied draws protect both sides. Funds only move once the stage they pay for is verifiably complete.
- 04Draw counts and triggers are lender-specific. Four stages is a common structure, not a fixed rule every construction lender follows.
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%.
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸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:
- ▸5.99% permanent-term contract rate — rates move daily; not a quote.
- ▸four-draw inspection schedule — draw counts and inspection triggers are lender-specific.
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.