The client
A newcomer buyer purchased a $328,000 home in Drummondville, insured at 10% down, arranging a separate $18,000 private second for cash needs after closing.
Purchase price
$328,000, Drummondville
10% down, insured
Private second
$18,000
9.75% interest-only, for post-closing cash, unrelated to the down payment
Buyer's own income
$7,400/month
Other debt
$215/mo car loan
The problem
The private lender's initial verbal quote on the second disclosed only its 9.75% interest-only rate, implying an annual cost of $1,755 -- but the lender also charges its own $1,500 fee, which never appeared in that quote.
What the verbal quote left out
- ▸The 9.75% rate alone implies a $1,755 annual cost on the $18,000 second
- ▸The private lender's own $1,500 fee was never mentioned in the verbal quote
- ▸A courtier's disclosure obligation covers the loan's actual total cost of borrowing, not just its stated rate
The rate quoted was accurate. What it implied about the loan's total cost was not.
The numbers
The insured first was never the issue; correcting what the private second actually costs was the entire file.
| The insured first, and the private second's corrected cost | Amount |
|---|---|
| Base mortgage (90% of purchase price) | $295,200 |
| CMHC premium (3.10% at 90% LTV) | +$9,151 |
| Total insured mortgage | $304,351 |
| Ratio check at the qualifying rate | Figure |
|---|---|
| Payment at the qualifying rate (7.00%), 25 years | $2,132/mo |
| GDS (payment + $280 tax + $110 heat) ÷ $7,400 income | 34.1% |
| TDS (GDS numerator + $146 private second + $215 car loan) ÷ $7,400 income | 39.0% |
34.1% GDS and 39.0% TDS sit comfortably inside CMHC's caps. Separately, the private second's own total cost of borrowing corrects from the $1,755 the verbal quote implied to $3,255 once the lender's $1,500 fee is properly included.
The solution
A courtier hypothecaire licensed under Quebec's Act respecting the distribution of financial products and services treated the private second's disclosure as its own obligation, separate from the insured first's already-compliant paperwork.
First, went back to the private lender in writing for a complete fee schedule rather than accepting the verbal figure at face value.
Second, recalculated the second's own total cost of borrowing to include the $1,500 fee, rather than let a rate-only figure stand as the disclosed cost.
Third, issued the buyer a corrected written disclosure before any document was signed, consistent with the disclosure obligations private financing carries in Quebec.
The outcome
The purchase funded insured at 34.1% GDS and 39.0% TDS, the private second closed on a corrected $3,255 disclosed cost of borrowing, and Quebec's welcome tax on the $328,000 purchase came to $3,030.
Both ratios sit comfortably inside CMHC's 39% GDS and 44% TDS maximums; the disclosure correction, not the ratios, was the substantive issue in this file.
What to take from this file
- 01A verbal rate quote is not the same thing as a complete cost-of-borrowing disclosure. Fees a lender charges separately from interest still belong in the total figure.
- 02Request a private lender's complete fee schedule in writing, every time. A verbal quote given informally can omit charges without anyone intending to mislead.
- 03A private second carries its own disclosure obligation, distinct from whatever compliance covers the insured first mortgage. Treat them as two separate files for disclosure purposes.
- 04Catching an incomplete disclosure before signing is the entire value of the review. After signing, the same gap becomes a much harder problem to fix.
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.
- ▸Gouvernement du Québec — Droits sur les mutations immobilières — Quebec's transfer duties ('welcome tax') — 2026 indexed brackets.
Illustrative in this file — lender-specific, not rules:
- ▸5.00% / 9.75% rates — rates move daily; neither is a quote.
- ▸the private lender's $1,500 fee and the corrected cost of borrowing — each private lender sets its own fee schedule; there is no published or universal figure.
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.