The client
A payor spouse buying a $280,000 home in Bridgewater, Nova Scotia at 5% down, with gross income of $6,800/month. Under the separation agreement he pays $1,100 a month in court-ordered child support — a real, legally-binding obligation that never shows up on a credit bureau and that a lender only discovers by asking for the agreement itself.
Applicant
Payor spouse, gross income $6,800/mo
Salaried, stable employment
Support obligation
$1,100/mo, court-ordered
Per the separation agreement
Purchase
$280,000, Bridgewater
Property tax $200/mo; lender heat estimate $110/mo
Down payment
$14,000 — 5%, the minimum at this price
Price is under the $500,000 tier boundary
Other debt
$300/mo car loan
the only other item on the bureau
The problem
A first lender's file qualified him on the full $6,800/month gross income, without ever asking whether any of it was already legally committed elsewhere. Support paid under a separation agreement doesn't appear on a bureau file the way a loan or a credit card does — a lender has to specifically ask for the agreement to find it.
The file, before and after the obligation was found
- ▸Qualified on the full $6,800/mo, no deduction: TDS 36.9% — comfortably inside CMHC's 44% maximum
- ▸Once the $1,100/mo support obligation is deducted from qualifying income: TDS 44.1% — just over the maximum
- ▸The mortgage itself never changed size — only which income was allowed to qualify it did
Nothing about the applicant's own file was misrepresented. The gap was a process failure: a first lender's intake never surfaced a private legal obligation that a bureau pull cannot see, and the file looked approved for exactly as long as nobody asked the right question.
The numbers
The insured mortgage's own structure never moved. Every point of difference between a declined file and an approved one came from which income figure the ratios were tested against.
| The insured loan | Amount |
|---|---|
| Purchase price | $280,000 |
| Down payment (5%, the minimum at this price) | −$14,000 |
| Base mortgage | $266,000 |
| CMHC premium at 4.0% (90.01–95% LTV band) | +$10,640 |
| Total insured mortgage | $276,640 |
| Ratio check at the qualifying rate | Uncorrected (gross income) | Corrected (support deducted) |
|---|---|---|
| Minimum qualifying rate on a 4.79% contract rate | 6.79% | 6.79% |
| Payment at the qualifying rate, 25 years | $1,902/mo | $1,902/mo |
| Income used | $6,800/mo | $5,700/mo |
| GDS (payment + $200 tax + $110 heat) ÷ income | 32.5% | 38.8% |
| TDS (GDS numerator + $300 car loan) ÷ income | 36.9% | 44.1% |
The payment itself, $1,902/mo at the qualifying rate, never changed. Deducting the $1,100/mo support obligation from the $6,800/mo gross figure dropped qualifying income to $5,700/mo, and that alone moved total debt service from comfortably approved to just over CMHC's 44% maximum. Gross debt service moved too, but stayed inside its own 39% cap — TDS, which also counts the car loan, was the ratio that actually failed.
The solution
A mortgage broker licensed under Nova Scotia's framework rebuilt the file around the correct income treatment once the separation agreement surfaced.
First, obtained the separation agreement directly rather than relying on the applicant's own description of what he paid. The agreement stated the $1,100/mo figure plainly, with no ambiguity about whether it was ongoing or set to change.
Second, re-ran the ratios with the obligation properly deducted. This is one accepted convention — some lenders instead add a legally-obligated support payment as a monthly debt in the TDS numerator rather than subtracting it from income, which can produce a different GDS result but a similar TDS one. Either way, the obligation has to be accounted for somewhere.
Third, closed the resulting gap with a small voluntary top-up. An extra $1,000 in savings, added to the down payment beyond the 5% minimum, trimmed the financed amount just enough to bring the qualifying payment down.
The outcome
Approved insured at 95% LTV, with TDS settling at 43.9% once the support obligation was correctly deducted and the small savings top-up was applied.
Nothing about the purchase price, the down payment tier, or the mortgage structure changed once the top-up was added — only the amount financed moved, by exactly enough.
What to take from this file
- 01A support obligation paid under a separation agreement doesn't show up on a bureau file. A lender only finds it by asking for the agreement directly — and a file that skips that step can look approved when it isn't.
- 02The mortgage payment never moved — only the income used to test it did. $1,902/mo at the qualifying rate, whether the file cleared at 36.9% or failed at 44.1%.
- 03GDS and TDS don't always move together. Gross debt service stayed inside its cap throughout; total debt service, which also counts the car loan, was the ratio that actually failed once the deduction was applied.
- 04A thin margin can be closed with a small, real fix. The gap here was worth less than 0.2 points of TDS — a $1,000 top-up from savings was enough.
- 05Ask for the separation agreement before submitting, not after a decline. Confirming the support treatment up front avoids re-arguing a file that was never correctly qualified in the first place.
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:
- ▸4.79% contract rate — rates move daily; not a quote.
- ▸deducting court-ordered support paid dollar-for-dollar from gross qualifying income — lenders vary in how they treat a legally-obligated support payment -- some deduct it from income, others add it as a monthly obligation; this file used one common convention illustratively.
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.