The client
A couple building a new house with a purpose-built, self-contained secondary suite in Nanaimo -- a city well over the 10,000-population threshold at which BC's Short-Term Rental Accommodations Act applies. The plan was to rent the main house out long-term and run the suite as a dedicated short-term rental, with neither owner living on site.
Property
New build with purpose-built secondary suite, Nanaimo
Appraised value on completion
$890,000
Down payment (20%)
$178,000
Mortgage
$712,000 conventional
Original plan
Main house rented long-term; suite run as a dedicated short-term rental
The problem
The submortgage broker's first pass at the file counted the suite's projected short-term rental income toward qualifying -- a reasonable-looking number for a self-contained unit in a strong tourism market. It ran into BC's rental income rules for a reason that had nothing to do with the property's condition.
What the Short-Term Rental Accommodations Act actually permits
- ▸In force since May 1, 2024, the Act limits short-term rentals to a host's principal residence, plus one secondary suite or accessory dwelling unit on the same property
- ▸It applies to municipalities with a population over 10,000 (and some smaller and opted-in communities); Nanaimo is well over that line and isn't on the province's exemption list
- ▸The permission runs FROM the principal residence -- a secondary suite can be short-term rented because the host lives in the main house, not on its own
- ▸Neither owner planned to live in the main house; the property had no host's principal residence on site at all, which meant the secondary suite had no lawful basis to be short-term rented under the Act, regardless of the suite's own quality or self-containment
The suite wasn't disqualified because of anything wrong with it -- it was disqualified because the structure the Act requires (an owner living in the principal residence, with one secondary suite short-term rented alongside it) didn't exist on this file at all.
The numbers
This is a conventional mortgage at 80% loan-to-value -- the ratios below compare qualifying with the disqualified short-term figure against qualifying with the suite correctly treated as a long-term rental.
| The build | Amount |
|---|---|
| Appraised value on completion | $890,000 |
| Down payment (20%) | $178,000 |
| Mortgage | $712,000 |
Two ways the suite's income was treated
| Suite income basis | Qualifying income | GDS | TDS |
|---|---|---|---|
| Short-term rental, 50% add-back (disqualified) | $14,800/mo | 38.8% | 40.8% |
| Long-term rental, 50% add-back (correct) | $14,225/mo | 40.3% | 42.4% |
Sizing
| Mortgage math | Figure |
|---|---|
| Minimum qualifying rate — greater of contract + 2% and 5.25% | 7.34% |
| Monthly payment at the qualifying rate | $5,137 |
| Monthly payment at the 5.34% contract rate | $4,280 |
The solution
Once the Act's principal-residence structure was clear, the submortgage broker didn't try to argue the suite's income back in -- there was no exemption to apply for. The fix was requalifying the file on income the property could actually earn lawfully.
The suite was repriced at the long-term rental rate for a comparable unit in the same neighbourhood, added back at the lender's own 50% policy -- one of several rental-income treatment methods lenders apply, the same treatment used for the disqualified short-term figure, just against a lower base rent.
50% add-back is this lender's own policy for this file, not a published industry standard; other lenders apply rental income differently.
The outcome
The mortgage funded at $712,000, 80% LTV, on a five-year fixed at 5.34%, qualifying payment $5,137, GDS 40.3% and TDS 42.4% once the suite was requalified on long-term rental income. Both ratios sit inside this lender's own conventional policy; nothing here is bound by CMHC's insured 39%/44% ceilings.
What to take from this file
- 01BC's Short-Term Rental Accommodations Act ties a secondary suite's short-term rental permission to a host's principal residence on the same property. No principal residence on site means no lawful short-term rental income from the suite either, regardless of the suite's quality.
- 02Check the Act's population threshold and exemption list before pricing any short-term rental income into a file. Nanaimo, and most mid-size and larger BC municipalities, are squarely inside the requirement.
- 03A disqualified income type isn't a smaller number -- it's zero, until requalified on a different basis entirely. Long-term rental income is a separate figure to source, not a discount off the short-term one.
- 04Confirm the occupancy plan before the first income projection goes into the file. Whether an owner intends to live on site decides which income the property can lawfully earn under this Act, before any lender's own policy is even applied.
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%.
- ▸Property Transfer Tax Act, RSBC 1996, c. 378, ss. 3(1) and 3.01(4) — BC's property transfer tax: 1% / 2% / 3% marginal brackets.
- ▸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:
- ▸5.34% contract rate — rates move daily; not a quote.
- ▸$420 property tax / $180 heat / $300 other debt — illustrative carrying costs for this file.
- ▸$2,800 short-term / $1,650 long-term suite rent, 50% add-back — illustrative deal figures and one lender's own rental-income policy, not a published rate or standard.
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.