The client
A young family buying in a Saskatoon market where housing starts have kept resale renovation projects like this one common, budgeting $60,000 for a defined renovation — a new kitchen, a finished basement, updated flooring — on a $365,000 purchase. Their first instinct, reasonably enough, was that any mortgage involving construction work meant a full construction draw mortgage: inspections at each stage, funds released in pieces, and interest charged as the work progressed.
Borrowers
Young family, both salaried
Clean credit, stable employment
Purchase price
$365,000
Existing home in Saskatoon
Renovation budget
$60,000
Fixed-price contractor quotes obtained in advance
As-improved value
$425,000
Purchase price plus the full renovation budget
Down payment
$42,500 — 10%
Calculated on the as-improved value
Household income
$122,000 / year
$10,167 per month for the ratio math
A car payment of $430/month was the only other debt on the file — small enough not to change the outcome, but real enough to belong in the TDS math below.
The problem
The renovation was clearly defined — fixed contractor quotes, a specific scope, no structural work — but the family had assumed “renovation” automatically meant a construction draw mortgage. That product exists for good reason: larger or riskier builds genuinely need staged inspections and advances tied to progress, because the lender is funding work that has not happened yet.
Applied to a $60,000 kitchen-and-basement job with a fixed quote in hand, that same product would have meant unnecessary inspection fees, a slower closing, and interest calculated during construction on money the family did not yet need — solving a risk this file did not actually have.
The numbers
Purchase Plus Improvements structures the whole $425,000 as-improved value as an insured purchase, with the renovation funds released in a single advance once the completed work is verified — not staged against progress.
| Structuring the as-improved purchase | Amount |
|---|---|
| Purchase price | $365,000 |
| Renovation budget | $60,000 |
| As-improved value | $425,000 |
| Down payment (10% of as-improved value) | −$42,500 |
| Base mortgage (90% LTV) | $382,500 |
| CMHC premium — 3.10% in the 85.01–90% LTV band, capitalized | +$11,858 |
| Total insured mortgage | $394,358 |
The minimum down payment at $425,000 is $21,250 (5% of the full as-improved value, since it sits under the $500,000 tier boundary); the family’s $42,500 clears that easily. The full price is well under the $1.5-million insured cap, and amortization runs 25 years.
| Rate & payments | Figure |
|---|---|
| Contract rate — 5-year fixed (illustrative, not a quote) | 4.34% |
| Minimum qualifying rate — greater of contract + 2% and 5.25% | 6.34% |
| Monthly P&I at the qualifying rate — the ratios run on this | $2,603 |
| Monthly P&I at the contract rate — what they actually pay | $2,148 |
| Ratio | Monthly |
|---|---|
| P&I at the qualifying rate | $2,603 |
| Property tax | $300 |
| Heat (lender-standard estimate) | $150 |
| Housing $3,053 ÷ income $10,167 → GDS 30.0% | ✓ |
| Car payment | $430 |
| Adding the car payment: $3,483 ÷ $10,167 → TDS 34.3% | ✓ |
Both ratios sit comfortably under the 39%/44% insured maximums — this file was never close on the numbers. The only real question was which product structure fit the renovation, and a single fixed-price quote answered it.
The solution
A mortgage broker licensed under Saskatchewan’s FCAA costed the renovation properly before choosing the product.
First, obtained fixed-price quotes for the full scope of work — kitchen, basement, flooring — removing the uncertainty that staged draws exist to manage in the first place. A defined, quoted renovation is a very different underwriting problem than an open-ended build.
Second, moved the file to a Purchase Plus Improvements structure instead of a construction draw mortgage. How advances actually get released on a genuine construction file — and why that machinery was not needed here — is covered in our guide to how construction mortgages release funds.
Third, structured the advance around a completion holdback, with the renovation portion released once the work was verified complete rather than staged against progress — the exact advance mechanics vary by lender and insurer program, and were treated as illustrative here rather than a fixed rule.
The outcome & the closing math
A single closing, a single advance once the renovation was verified complete, and no staged inspections. Compared with the family’s original assumption — a full construction draw mortgage — the same $60,000 renovation closed faster and with fewer moving parts.
| Cash due at closing (beyond the down payment) | Amount |
|---|---|
| Saskatchewan’s 6% PST on the $11,858 default-insurance premium — cash, cannot be added to the loan | $711 |
| Legal fees & adjustments | varies |
Saskatchewan has no land transfer tax; title and mortgage registration through ISC applies on a modest fee scale, small enough that it stays qualitative here rather than quoted at a figure that has changed more than once in recent years.
What to take from this file
- 01Not every renovation needs a construction draw mortgage. Staged inspections and advances exist to manage the risk of unfinished, undefined work — a fixed-price, fully scoped job is a different problem.
- 02Purchase Plus Improvements finances the as-improved value as one insured purchase. The down payment, premium band and ratio maximums all run off that combined figure, not the bare purchase price.
- 03Get fixed quotes before choosing the product. A costed, defined scope is what let this file skip draws entirely — an open-ended renovation would not have qualified for the same structure.
- 04Advance and holdback mechanics are lender- and insurer-specific. Confirm exactly when funds release and what the completion holdback requires before setting a client’s expectations.
- 05Leave provincial registration costs qualitative where the fee schedule is not settled. Saskatchewan’s land-titles fees have changed more than once recently — a specific number here would risk being wrong by the time the file closes.
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.
- ▸Government of Saskatchewan, Ministry of Finance — Information Bulletin PST-73, "Information for Vendors of Insurance Contracts" (Issued May 31, 2017) — 6% Saskatchewan PST on default-insurance premiums.
- ▸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:
- ▸quote-based single advance on completion — advance and holdback mechanics vary by lender and insurer program.
- ▸4.34% contract rate — illustrative, not a quote.
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.