The client
A homeowner in Greater Sudbury is exiting a $175,000 private first mortgage to an A-lender refinance. Unrelated to anything the borrower did, the private lender -- an individual -- was himself being sued by his own creditor over a separate debt, and that creditor obtained a garnishing order attaching amounts payable to the lender, including this mortgage.
Amount owed to private lender
$175,000
Current throughout
Garnishing order amount
$40,000
Attached to the lender's own receivable
Whose debt was garnished
The lender's, not the borrower's
An unrelated dispute between the lender and his own creditor
Where the payout actually goes
Split: court and lender
Not one payment
The problem
The borrower's own debt was never in dispute -- $175,000, current, straightforward to pay out. What complicated the exit was a dispute the borrower had nothing to do with: the private lender himself owed money to his own creditor, who sued and obtained a garnishing order (a writ of seizure) attaching any amount payable TO the lender, including this mortgage.
Why the discharge couldn't be one simple payment
- ▸A garnishing order attaches to the debtor of the garnished party -- here, the borrower, because the borrower owes the private lender
- ▸Once served, the borrower's solicitor is legally required to pay the garnished portion into court, not to the lender, regardless of what the mortgage itself says
- ▸Paying the full amount to the lender directly, in ignorance of the order, would not have discharged the borrower's obligation to the court
This is a different problem than a discharge statement that's simply wrong or stale -- here the amount owed was never in question; only where each dollar of it was legally required to go.
The numbers
The refinance still had to raise the full amount owed -- what changed was how the funds were disbursed at closing, not how much.
| The payout, split by the garnishing order | Amount |
|---|---|
| Total owed to the private lender | $175,000 |
| Paid into court under the garnishing order | $40,000 |
| Released to the lender directly | $135,000 |
| Qualifying at the stress-tested rate | Figure |
|---|---|
| Minimum qualifying rate on a 5.15% contract rate | 7.15% |
| Payment at the qualifying rate, 25 years | $1,242/mo |
| TDS (payment + $340 tax + $140 heat + $300 car loan) ÷ $8,100 income | 25.0% |
TDS is informational only on this uninsured refinance -- the ratios were never close to a concern; the entire file turned on the disbursement, not the borrower's own capacity to carry the loan.
The solution
A mortgage agent treated the garnishing order as a closing-mechanics problem to solve precisely, not a reason to delay the whole file.
First, obtained the garnishing order itself, not a secondhand description of it. The order specified the exact amount attached and the court to which it had to be paid.
Second, had the solicitor confirm in writing how the two payments had to be structured. A certified payment to the court for $40,000, and a separate certified payment to the lender for the remaining $135,000 -- never one combined payment.
Third, obtained the lender's own written acknowledgment of the split before funding. A lender disputing the order's amount at the last minute would have stalled the discharge regardless of how correctly the funds were structured.
The outcome
Both payments cleared exactly as the order required -- $40,000 to the court, $135,000 to the lender -- and the discharge registered without further dispute. The refinance funded at 5.15%, and TDS settled at 25.0%.
A garnishing order against a private lender's own receivable is uncommon, but not unheard of -- it's worth asking, on any private exit, whether the lender is an individual with disputes of his own that could attach to the very payment being planned.
What to take from this file
- 01A garnishing order can attach to a private lender's own receivable, not just the borrower's other debts. The mortgage being paid out is itself an asset the lender's own creditors can reach.
- 02Get the order itself, not a description of it. The exact attached amount and the court it's payable to have to come from the order, not from either party's recollection.
- 03Structure the closing as two separate certified payments, never one. Combining them risks the court's portion being disputed as never properly paid.
- 04The borrower's own debt-service math is rarely the issue in a file like this. TDS cleared easily throughout -- the entire complication sat in disbursement, not qualification.
- 05Ask whether a private lender has disputes of their own. An individual lender's own legal exposure can reach into a file that otherwise has nothing to do with 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.
- ▸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:
- ▸5.15% contract rate — rates move daily; not a quote.
- ▸the total debt service figure — this file is an uninsured refinance, so there is no CMHC ratio ceiling -- the number is informational.
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.