The client
One spouse repurchasing a $340,000 condo, close to the Canadian average home price, after the $410,000 sale of the matrimonial home, on solo qualifying income of $6,400/mo. The matrimonial home had sold for a fair price and the settlement called for an even equity split — the repurchase plan was simply built on the wrong half of it.
Matrimonial home sale price
$410,000
Existing mortgage balance $265,000 paid out
Selling costs
$24,700 total
Real estate commission and legal/discharge costs
New purchase price
$340,000
PEI condo
Solo qualifying income
$6,400 / month
T4 employment
Other debt
Car loan $300/mo
Unchanged by the move
The problem
The settlement's equity split was straightforward — half each of whatever the sale actually netted. The repurchase plan, though, had been built around half of the gross equity: sale price minus the existing mortgage, with nothing yet taken off for closing costs on the sale itself. Which closing-cost categories actually change by province is a question worth asking before pricing any repurchase, not after.
The number the plan was built on, versus the number that showed up
- ▸Gross equity assumed: $410,000 sale price minus $265,000 mortgage — $145,000, half of which is $72,500
- ▸Real estate commission and legal/mortgage-discharge costs came off the sale proceeds first, before either spouse saw a dollar
- ▸Net proceeds after those costs: $120,300 — half of which is $60,150, a $12,350 shortfall against the plan
A $12,350 gap in the down payment doesn't just mean less cash on hand — on an insured purchase it can push the loan into a higher CMHC premium band entirely, which is exactly what happened here.
The numbers
The purchase price never moved. What moved was how much of it the down payment could cover, and that single change rippled into the premium band, the insured mortgage size, and the payment — all before a mortgage rate was even discussed.
| Planned down payment vs. actual | Amount |
|---|---|
| Naive down payment (half of gross equity) | $72,500 |
| Actual down payment (half of net proceeds, after selling costs) | $60,150 |
| Shortfall against the plan | $12,350 |
| Insured mortgage at the planned down payment (2.40% band) | $273,920 |
| Insured mortgage at the actual down payment (2.80% band) | $287,686 |
| Structuring the repurchase | As planned (naive) | As it actually was |
|---|---|---|
| Down payment | $72,500 | $60,150 |
| Loan-to-value | 78.7% | 82.3% |
| CMHC premium band | 2.40% | 2.80% |
| Premium, capitalized | $6,420 | $7,836 |
| Total insured mortgage | $273,920 | $287,686 |
The smaller down payment cost $12,350 twice over: once as less equity going in, and again as a higher premium band on what remained to be insured — together adding $13,766 to the mortgage before the qualifying rate is even applied. The $60,150 actually available still clears CMHC's minimum-down floor of $17,000 for this price with room to spare.
Qualifying on the actual numbers
| Ratio check at the qualifying rate | Figure |
|---|---|
| Minimum qualifying rate on a 4.99% contract rate | 6.99% |
| Payment at the qualifying rate, 25 years | $2,013 |
| GDS (payment + $240 tax + $110 heat) ÷ $6,400 income | 36.9% |
| TDS (GDS numerator + $300 car loan) ÷ $6,400 income | 41.6% |
The solution
A mortgage professional working in Prince Edward Island re-ran the repurchase against the actual sale numbers before the offer was ever written, rather than letting the gap surface at commitment stage.
First, pulled the real estate lawyer's estimated statement of adjustments for the matrimonial home sale — commission, legal fees and the mortgage discharge — instead of relying on either spouse's own running estimate of the payout.
Second, recalculated the equalization split against net proceeds, not the gross sale price, and confirmed the resulting $60,150 still cleared CMHC's minimum-down floor for the $340,000 purchase.
Third, priced the file at the correct 2.80% premium band from the outset, so the pre-approval the borrower carried into house-hunting matched what the file would actually qualify for — not a number that would need revising once an offer was already in.
The outcome
Priced correctly from the start against the actual $60,150 available, the purchase closed insured at the 2.80% premium band, with GDS at 36.9% and TDS at 41.6% — both comfortably inside CMHC's maximums.
Prince Edward Island's own real property transfer tax applies to this purchase; because its current rate is under legislative dispute, no dollar figure is quoted here — confirm the applicable rate with the closing lawyer before estimating total cash needed.
What to take from this file
- 01Half of gross equity is not half of the cash available. Commission, legal fees and the mortgage discharge come off before either spouse sees a dollar.
- 02A smaller down payment can push a purchase into a higher CMHC premium band, adding cost twice over — less equity in, and a higher rate on what's insured.
- 03Pull the lawyer's estimated statement of adjustments before pricing a repurchase, not a spouse's own mental math on what the sale will net.
- 04Confirm the actual down payment still clears CMHC's minimum-down floor before assuming a smaller number than planned is still workable.
- 05Never quote a PEI transfer-tax dollar figure. State plainly that the rate is unsettled rather than estimate it.
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.
Illustrative in this file — lender-specific, not rules:
- ▸4.99% contract rate — rates move daily; not a quote.
- ▸Prince Edward Island's own transfer-tax figure — not published here; the enacted rate above $1,000,000 could not be confirmed, so no dollar figure is given for this file.
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.