The client
A household in Cowansville consolidated $22,000 of credit-card balances into a refinance of their $185,000 mortgage, broken 15 months before its own term ends.
Existing mortgage balance
$185,000
4.95%, 15 months remaining
Credit-card balances
$22,000
Being consolidated
Outgoing lender's own discharge fee
$325
New lender's own hypothec registration/setup fee
$275
A separate charge, from a different institution
The problem
The correctly-calculated $1,620 break penalty -- the lesser of the interest-rate differential and three months' interest -- plus the outgoing lender's $325 discharge fee were both accounted for in the household's budget. But the NEW lender's own $275 hypothec registration/setup fee, a genuinely separate charge from a different institution, had been conflated with the discharge fee as though the two were one line item.
Two fees, two institutions
- ▸The outgoing lender's own $325 discharge fee covers releasing its OWN security -- nothing else
- ▸The new lender's own $275 fee covers registering the NEW hypothec -- a separate charge that the outgoing lender's fee has no relationship to at all
- ▸The household's own budget totalled every other line correctly, but had priced 'closing fees' as a single $325 amount instead of $325 plus $275
Neither fee was disputed once identified separately. The problem was that only one of the two had ever made it into the budget.
The numbers
Adding the second, previously-uncounted fee to the amount financed is the entire correction on this file.
| What the consolidation actually needed to finance | Amount |
|---|---|
| Existing balance + debts + penalty + outgoing lender's discharge fee | $208,945 |
| New lender's own registration/setup fee, previously uncounted | $275 |
| Correct amount to finance | $209,220 |
| Break penalty check | Figure |
|---|---|
| Interest-rate-differential (0.70 points, 15 months) | $1,620 |
| Three months' interest at 4.95% | $2,289 |
| Lesser of the two, per the contract's own clause | $1,620 |
The penalty comparison itself was never the issue on this file -- $1,620 is correctly the lesser of the two figures, exactly as the mortgage's own clause requires. The $275 gap sat entirely in the closing-cost budget, one institution's discharge fee removed from another's own registration fee.
The solution
A courtier hypothécaire licensed under Quebec's Act respecting the distribution of financial products and services itemized every closing-cost line by which institution actually charges it, rather than treating 'closing fees' as one number.
First, confirmed the outgoing lender's own $325 discharge fee covers only releasing its own security.
Second, confirmed the new lender's own $275 hypothec registration/setup fee is a separate charge, unrelated to the discharge fee.
Third, added the previously-uncounted $275 to the amount financed, bringing the true total to $209,220 before the file closed.
The outcome
The consolidation funded at $209,220, at 4.60%, with total debt service settling at 25.3%.
Because this file is uninsured, CMHC's ratio maximums do not apply directly; the 25.3% figure is informational.
What to take from this file
- 01An outgoing lender's discharge fee and a new lender's registration fee are two separate charges from two separate institutions. Confirm both are in the budget, not just one labelled generically as 'closing fees'.
- 02Correctly calculating the break penalty does not guarantee every other closing cost is correctly counted. Check each fee line independently.
- 03A mortgage's own lesser-of penalty clause is worth confirming even when it is not the source of the error. $1,620 being correct is exactly why the $275 gap elsewhere was easy to miss.
- 04Itemize closing costs by which institution charges them, not by category. 'Discharge and registration fees' as one line is where a second, real fee goes missing.
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%.
- ▸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:
- ▸4.95% / 4.25% / 4.60% rates — rates move daily and vary by lender; none is a quote.
- ▸the $325 / $275 fee amounts — each institution sets its own discharge and registration fees; these are illustrative, not published tariffs.
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.