The client
A homeowner in Hawkesbury, Ontario, refinancing their mortgage for a home renovation, whose bureau file still showed a personal loan as open months after they had paid it off in full at their own credit union.
Borrower
Combined income $7,100/month
Stable employment
Existing mortgage
$242,000 balance
Refinanced for a $28,000 renovation cash-out
The misapplied payout
$0 actually owed, $285/mo still counted
Personal loan paid off in full; funds applied to a different loan by a one-digit account-number error
Other debt
$260/mo auto loan
real, unrelated, unaffected
The problem
The homeowner held two loans at the same credit union — the personal loan they intended to pay off, and an unrelated auto loan — with account numbers that differed by a single digit. When the payout draft was processed at the branch, it was applied to the wrong loan: the auto loan's balance dropped by an amount it was never owed against, and the personal loan stayed open, drawing down not one cent.
What the credit union's own records actually showed
- ▸Personal loan, intended to be paid off in full: still open, scheduled payment $285/mo
- ▸Auto loan, never meant to receive the payout: balance reduced by the misapplied amount
- ▸Both loans reporting to the bureau exactly as the credit union's own ledger showed them — accurately reflecting an internal misapplication, not a bureau error
No one had failed to pay anything. The household's money had reached the credit union and been applied — just to the wrong loan on the same membership — and the credit report was simply reporting what the credit union's own ledger told it.
The numbers
The refinance structure itself never changed. The gap in this file was one loan payment that had, in fact, already been eliminated — just not where the paperwork said it was.
| The refinance | Amount |
|---|---|
| Existing mortgage balance | $242,000 |
| Renovation cash-out | +$28,000 |
| New mortgage balance | $270,000 |
| Total debt service | As first submitted | Corrected |
|---|---|---|
| Payment at the qualifying rate (6.70% on a 4.70% contract), 25 years, plus tax and heat | $2,251 | $2,251 |
| Auto loan (real, unrelated) | $260 | $260 |
| Personal loan, still showing open | $285 (already paid off; misapplied elsewhere) | — (payout reallocated) |
| Total debt service | 39.4% | 35.4% |
Nothing here required paying the personal loan a second time. The total debt service figure only needed the credit union to move the payout it had already received to the account it was always meant to close.
The solution
An FSRA-licensed Ontario mortgage agent traced the discrepancy to the credit union's own internal records rather than treat the open loan as a debt the client had somehow failed to clear.
First, pulled the original payout receipt. It showed the correct amount, paid on the date the client remembered, at the same credit union — ruling out the possibility the payout simply never happened.
Second, compared the two account numbers side by side. A single transposed digit separated the personal loan's account number from the auto loan's, and the credit union confirmed the payout had landed on the auto loan instead.
Third, had the credit union reverse and correctly reapply the payout rather than have the client pay the personal loan a second time to force the file closed on paper.
The outcome
The refinance funded at $270,000, with the personal loan corrected to closed and total debt service settling at 35.4% once the misapplied payout was moved to the right account.
Because this is a refinance of an existing owned property, no transfer tax applied; closing costs were legal fees and standard adjustments only.
What to take from this file
- 01A loan that looks unpaid on the bureau may already be paid — just recorded against the wrong account. Holding two loans at the same institution with similar account numbers is a real, if narrow, risk.
- 02Pull the original payout receipt before assuming a payment never happened. It's the fastest way to distinguish a genuine missed payment from a processing error.
- 03The fix is a correction, not a second payment. Having the institution reallocate its own misapplied funds avoids the client paying twice for the same debt.
- 04A credit report can be technically accurate and still wrong for the file. It correctly showed what the credit union's ledger said — the ledger itself was the error.
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:
- ▸4.70% contract rate — rates move daily; not a quote.
- ▸$295/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.