The client
A household self-building on a rural lot outside Saint John, New Brunswick, at a total project cost of $340,000 with 5% down. Both borrowers are salaried, and the build itself had gone smoothly — every framing, insulation and drywall inspection cleared on the first visit.
Borrowers
Salaried couple, combined income $8,200/month
Same employers throughout the build
Total project cost
$340,000 — rural lot plus construction
5% down, the minimum at this price
Draw schedule
4 stages, final draw 20% of the insured mortgage
The lender's standard structure for this build
Other debt
$280/mo car loan
The only item on either bureau file
The blocker
Failed well-water potability test
Bacterial contamination on the first sample
The problem
The property sits outside municipal water and sewer service, which is ordinary for this part of rural New Brunswick — and it is exactly why the lender's construction-mortgage policy conditions the final draw on a satisfactory well-water potability test and septic certification, separate from the ordinary building-code inspections that clear each stage in between. A rural property with a well and septic carries this extra step no matter how clean the rest of the file is.
Where the build actually stood
- ▸Framing, insulation and drywall: all cleared on schedule, no re-inspections needed
- ▸Final draw conditioned on the well test: $67,184 — 20% of the total insured mortgage
- ▸First water sample result: bacterial contamination — a health condition, not a construction defect
Nothing about the failed sample reflected on the builder's work or the household's finances. A well can test positive for bacteria for reasons that have nothing to do with how the house itself was built, and the lender's policy treats it as exactly that — a condition to clear, not a flag to investigate further.
The numbers
The construction mortgage itself was never in question at any point — the ratios were comfortable from the first submission, and the only number that moved during the delay was the cost of carrying the drawn balance an extra month.
| The insured construction-to-permanent mortgage | Amount |
|---|---|
| Total project cost | $340,000 |
| Down payment (5%, the minimum at this price) | −$17,000 |
| Base mortgage | $323,000 |
| CMHC premium at 4.0% (90.01–95% LTV band) | +$12,920 |
| Total insured mortgage | $335,920 |
| Draw schedule | Figure |
|---|---|
| Final draw (20% of the total insured mortgage) | $67,184 |
| Balance already drawn before the final stage | $268,736 |
| One extra month of interest-only carrying cost on the drawn balance, at 5.75% | $1,288 |
Ratios at the qualifying rate, unaffected by the delay
| Ratio check | Figure |
|---|---|
| Minimum qualifying rate on a 4.79% contract rate | 6.79% |
| Payment at the qualifying rate, 25 years | $2,309/mo |
| GDS (payment + $250 tax + $120 heat) ÷ $8,200 income | 32.7% |
| TDS (GDS numerator + $280 car loan) ÷ $8,200 income | 36.1% |
The $1,288 extra month of carrying cost was the entire financial consequence of the delay. GDS and TDS never moved, because nothing about the household's income, debt or the mortgage amount changed — only the calendar did.
The solution
A mortgage broker licensed under New Brunswick's framework treated the well test as a remediation project to manage, not a file to re-underwrite.
First, confirmed the exact deficiency with the testing lab. Bacterial contamination on a new well is common and usually treatable, but the broker wanted the specific result in hand before assuming the standard fix would be enough.
Second, had the builder shock-chlorinate the well and wait out the standard flush-and-rest period. Retesting immediately after chlorination can give a false result, so the timeline was built around the lab's own recommended waiting period, not around how quickly the family wanted to close.
Third, kept the lender's file open on a confirmed remediation timeline. Rather than let the draw request lapse and force a fresh review, the broker gave underwriting a dated plan for the retest — the kind of update that keeps a construction file's progress advances moving instead of stalling on missing communication.
The outcome
The retest passed, the lender released the final $67,184 draw, and the take-out mortgage funded at $335,920 with no change to the price, the down payment or the ratios first submitted.
New Brunswick's flat 1% Real Property Transfer Tax applied to the $340,000 project value at registration, coming to $3,400 — a routine closing cost, confirmed with the lawyer's trust ledger rather than estimated.
What to take from this file
- 01A rural well/septic condition is a health-and-safety gate, not a ratio problem. This file never had a GDS or TDS issue — the water test was the entire obstacle.
- 02A failed water sample is not a construction defect. Bacterial contamination on a new well is common and usually resolves with chlorination and a retest, on its own timeline.
- 03Build the remediation timeline around the lab, not the closing date. Retesting too soon after treatment risks a false result and a second delay.
- 04Keep the lender's file open with a dated plan. A confirmed remediation timeline kept the draw request active instead of forcing a fresh review.
- 05Price out the delay in real dollars. One extra month of interest-only carrying cost, $1,288, was the file's only actual cost from the whole episode.
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.
- ▸CMHC — Purchase (Mortgage Loan Insurance) — default-insurance premium schedule by LTV band (25-year amortization).
- ▸CMHC — CMHC Home Start — minimum down payment tiers (5%/10%) and the $1.5M insured price cap.
- ▸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.
- ▸Real Property Transfer Tax Act, S.N.B. (via laws.gnb.ca) — New Brunswick's flat 1% real property transfer tax.
- ▸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:
- ▸4.79% take-out contract rate / 5.75% interim construction rate — rates move daily; neither is a quote.
- ▸the 4-stage, 20% final-draw schedule — each lender publishes its own draw schedule and stage percentages.
- ▸the bacterial-contamination result and remediation timeline — illustrative anonymized detail; well-water testing outcomes are file-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.