The client
A buyer in Stratford was purchasing at $375,000, $37,500 down, with a clean two-year income and employment history. One line on the bureau did not look like an ordinary consumer debt: an unsecured civil judgment for $28,000, being paid down at $410/mo.
Purchase price
$375,000
Stratford
Down payment (10%)
$37,500
Insured file, 90% LTV
Civil judgment balance
$28,000
Court-approved structured settlement
Settlement instalment
$410/mo
Current, on time, for over a year
Household income
$8,300/mo
Existing car loan $225/mo
The problem
The judgment had nothing to do with this purchase. Years earlier, the buyer had signed and then walked away from an Agreement of Purchase and Sale on a different property. The deposit was forfeited to that seller, as it should have been — but the seller's actual loss on the eventual resale, plus carrying costs, ran higher than the forfeited deposit covered. The seller sued for the difference, and the buyer consented to a settlement rather than litigate further.
What the settlement actually is
- ▸An unsecured personal judgment debt for $28,000 — never registered as a lien against any property
- ▸A court-approved structured settlement, paid down at $410/mo, current with no missed payments
- ▸A genuinely different animal from an ordinary unpaid credit card or collection account
The first lender's underwriting policy treats any open civil judgment the same way it treats an unpaid collection: clear it before closing, in full. That policy assumes a judgment sitting there unaddressed. This one had already been addressed, in court, on a documented schedule — the first lender's condition would have drained $28,000 the household needed for closing costs, to settle a debt that was never actually behind.
The numbers
At 10% down this is an insured file, with CMHC's GDS 39% / TDS 44% maximums governing the ratios once the settlement's real instalment is counted correctly.
| Structuring the insured loan | Amount |
|---|---|
| Purchase price | $375,000 |
| Down payment (10%) | −$37,500 |
| Base mortgage (90% LTV) | $337,500 |
| CMHC premium — 3.10% in the 85.01–90% LTV band, capitalized | +10,462 |
| Total insured mortgage | $347,962 |
| Rate & payments | Figure |
|---|---|
| Contract rate (illustrative, not a quote) | 4.85% |
| Minimum qualifying rate | 6.85% |
| Monthly P&I at the qualifying rate | 2,405 |
| TDS | Figure |
|---|---|
| Housing costs (P&I + tax + heat) | 2,825 |
| Car loan | 225 |
| Judgment settlement instalment | 410 |
| Total Debt Service vs. the 44% cap | 41.7% ✓ |
Ontario land transfer tax on $375,000 comes to $4,100 at closing — unrelated to the judgment, and payable regardless.
The solution
A mortgage agent licensed under Ontario's Mortgage Brokerages, Lenders and Administrators Act treated the judgment as a document to read, not a balance to estimate.
First, obtained the consent order and the settlement's full payment history, confirming the instalment was current and had been for over a year.
Second, confirmed with the buyer's litigation counsel that the debt was unsecured and personal — never registered against any property, including the one being purchased.
Third, moved the file to a second lender who would count the documented $410/mo instalment under its total debt service ratio, instead of demanding the full balance paid out at closing.
The outcome
The purchase funded at 4.85% on the full $347,962, with TDS at 41.7% once the judgment's real instalment was counted correctly, and closing costs left intact instead of being drained to pay the judgment out in full.
What to take from this file
- 01A civil judgment from a broken purchase is a different animal from ordinary consumer debt. Read the settlement, don't estimate the balance.
- 02A forfeited deposit doesn't always cover a seller's actual loss. Canadian courts routinely allow a suit for the shortfall on top of keeping the deposit.
- 03A first lender's ‘clear every judgment’ policy is an overlay, not a rule. A documented, current, court-approved settlement can be counted at its real instalment instead.
- 04Confirm whether a judgment is secured against any property before pricing a fix. An unsecured personal judgment and a registered lien are handled very differently.
- 05Draining closing-cost funds to pay out a performing settlement early can create a worse problem than the one it solves. Verify the real number before recommending either path.
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.
- ▸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.
- ▸Ontario.ca — Calculating Land Transfer Tax / Land Transfer Tax Refunds for First-Time Homebuyers — Ontario's marginal land transfer tax brackets and first-time-buyer refund.
Illustrative in this file — lender-specific, not rules:
- ▸4.85% contract rate — rates move daily; not a quote.
- ▸$305/mo tax and $115/mo heat estimate — lender-standard estimates, not rules.
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.