The client
A homeowner in Prince George financed a staged renovation through a single private lender, advanced in two instalments under one registered mortgage: $40,000 up front, then a further $25,000 four months later.
Property
$410,000, Prince George
Detached, staged renovation in progress
First advance
$40,000
At closing
Second advance
$25,000
Four months later, same registered mortgage
Private balance at payout
$65,000
10.50%, interest-only
The problem
BC's Property Law Act does not treat every later advance under an existing mortgage as automatically protected in first position. Section 28(2) governs when a further advance keeps the priority of the mortgage's original registration date -- and when it instead ranks behind whatever else got registered against the title in the meantime.
What put the second draw at risk
- ▸Between the first and second advances, an unrelated creditor registered an $8,500 judgment against the property
- ▸Section 28(2) protects a further advance's priority only where the lender had no written notice of that intervening registration, or holds a priority agreement with the later party
- ▸A routine registry check the private lender's own broker ran before the second draw had already turned up the judgment -- the advance went ahead anyway, on the assumption the mortgage's original registration date covered it
The first $40,000 advance was never in question. Whether the second $25,000 draw actually ranked ahead of the judgment, or behind it, was the entire question a fresh title search for the payout had to answer.
The numbers
Once the second draw's priority was confirmed as unprotected, sizing the payout to deliver genuinely clean first position was the remaining, ordinary arithmetic.
| Sizing the payout to clear the judgment alongside the balance | Amount |
|---|---|
| Private balance owed (both advances, interest-only) | $65,000 |
| Intervening judgment, cleared at closing | $8,500 |
| New payout mortgage | $73,500 |
| Total debt service | Before (private, interest-only) | After (payout mortgage) |
|---|---|---|
| Payment | $569 | $545 |
| Property tax | $230 | $230 |
| Heat (lender estimate) | $90 | $90 |
| Car loan | $180 | $180 |
| Total debt service | 20.6% | 20.1% |
Both figures sit comfortably under standard lender ceilings on the borrower's own income -- the arithmetic was never the hard part of this file. Confirming exactly what the $73,500 actually needed to cover, and getting a fresh payout figure that reflected it, was.
The solution
A submortgage broker registered under BC's Mortgage Brokers Act treated the intervening judgment as a title question to resolve, not a reason to assume the full $65,000 would simply fund in clean first position because one mortgage had always covered both draws.
First, ordered a fresh title search spanning the date of the first advance through to closing, confirming the judgment's exact registration date fell between the two draws, not before either of them.
Second, confirmed from the private lender's own file that the registry check before the second draw had already surfaced the judgment, meaning the advance proceeded with actual knowledge of it -- and so did not qualify for section 28(2)'s further-advance protection.
Third, sized the new payout mortgage to clear the private balance and the judgment together, so the new lender registered behind nothing at all rather than behind a disputed $8,500 encumbrance.
The outcome
The payout mortgage funded at 5.65%, the $8,500 judgment was paid and discharged at closing alongside the private balance, and the new lender registered in undisputed first position.
Because this file is uninsured, CMHC's ratio maximums do not apply directly; the 20.6% and 20.1% figures are informational.
What to take from this file
- 01A mortgage's registration date does not automatically protect every later advance made under it. Each further draw's own priority can be a separate question.
- 02BC's Property Law Act s.28(2) tests further-advance priority against what was registered between draws -- not against the mortgage's own original filing date.
- 03A private lender who advances with actual knowledge of an intervening registration loses the protection s.28(2) would otherwise give. Confirm what the lender's own file actually shows, not just what the mortgage document says.
- 04Sizing an exit payout means confirming what is genuinely secured in first position, not simply adding up the balance a payout statement quotes.
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:
- ▸5.65% / 10.50% rates — rates move daily; neither is a quote.
- ▸the staged $40,000/$25,000 advances and the $8,500 judgment — illustrative deal specifics 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.