The client
The owner-occupant of a legal duplex in Quebec City, renting the second unit, with a mortgage maturing for a switch a few weeks before July 1 — Quebec's traditional lease-turnover date. The current tenant's lease, and its rent, end June 30; the incoming tenant's lease, already signed at a higher rent, does not start until July 1.
Existing mortgage
$268,000 balance, 19 years left
Uninsured, switching to a new lender
Owner’s own income
$5,400/month
Employment income
Current documented rent
$980/month
Lease expiring June 30, deposits on record
Incoming signed rent
$1,175/month
Lease starts July 1 — no deposit history yet
Regulator
Courtier hypothécaire
Quebec’s Autorité des marchés financiers (AMF)
Both leases are real and both are signed. Only one of them has a deposit history behind it on the day the switch has to close.
The problem
The new lender's documentation policy counts rental income only when it can be matched against deposits already showing up in the bank records it reviews — not a signed lease standing alone. That is a reasonable, common way for a lender to verify rent is actually being received rather than merely promised on paper, but it collides directly with Quebec's near-universal residential lease calendar: the vast majority of Quebec leases turn over on July 1, so any switch closing in the weeks before that date runs into exactly this gap.
Why the higher rent couldn’t be used yet
- ▸The incoming tenant’s $1,175/mo lease is fully signed, but doesn’t start until July 1
- ▸No deposit has ever been received against that lease, so there is nothing in the bank records to match it to
- ▸The mortgage matures, and the switch must close, before July 1 — there is no way to wait for the first deposit to post
The mortgage's own maturity date decided the question. The switch could not be pushed past it just to pick up eleven days of a lease that hadn't started yet.
The numbers
With the documentation rule confirmed up front, the comparison became simple: qualify on the rent the file could actually prove, and see whether that was enough on its own.
| Qualifying on the documented rent vs. the signed-but-undocumented rent | Amount |
|---|---|
| Combined income, using the documented $980/mo rent | $6,380/mo |
| Combined income, using the signed $1,175/mo rent (not usable yet) | $6,575/mo |
| TDS on the documented rent | 34.0% |
| TDS on the signed-but-undocumented rent | 33.0% |
The switch payment behind both figures
| Housing cost | Monthly |
|---|---|
| Switch payment — $268,000, 19 years remaining, at 4.89% | $1,800 |
| Property tax | $260 |
| Heat (lender-standard estimate) | $110 |
| Total monthly housing cost | $2,170 |
The one-point gap between 34.0% and 33.0% TDS is the entire effect of the documentation timing — same balance, same rate, same housing cost, tested against $6,380/mo of income instead of $6,575/mo. Either number clears comfortably; the gap simply wasn't one this file needed closed.
The solution
A courtier hypothécaire licensed with Quebec's AMF confirmed the new lender's documentation rule before ever presenting a number to the client, working from the same discipline our rental and investment property underwriting guide sets out.
First, asked exactly which rent the policy would accept. Documented deposits, not a signed lease alone — settled before the file was built, not discovered after a number had already been promised.
Second, ran the file on the conservative, currently-documented rent first. If $980/mo hadn't been enough on its own, there would have been a real decision to make about timing; since it was, there was nothing to gain by chasing the higher figure. The broader context is set out in mortgage payment increases at renewal.
Third, closed on schedule, ahead of the mortgage's maturity date, rather than exploring whether the switch could be pushed past July 1 to pick up a rent that wasn't provable yet.
The outcome
Funded on schedule at 4.89%, at 34.0% TDS on the rent the file could actually document. A note went on file that once the new tenant's first deposits post in July, the higher, now-provable rent will support a stronger ratio the next time this property comes up for renewal or refinance.
How strictly a given lender verifies rental income before counting it -- a signed lease, a deposit history, or something in between -- is that lender's own policy, not a CMHC or regulatory rule.
What to take from this file
- 01A lender counts the rent it can see in the bank records, not the rent that's merely signed on paper. Confirm which one applies before quoting a client any number.
- 02Quebec's July 1 lease turnover creates a predictable timing gap for any switch closing in the weeks before it. Know which side of the date a given file falls on.
- 03Qualify on the conservative, documented number first. Only chase the better one if the file actually needs it closed.
- 04A documentation gap today is a stronger file tomorrow. Note it for the next renewal or refinance once the new lease starts showing up in deposits.
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.
- ▸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:
- ▸4.89% switch contract rate — rates move daily; not a quote.
- ▸requiring deposits, not a signed lease alone, to count rental income — how strictly a given lender verifies rental income before counting it is that lender's own policy, not a CMHC or regulatory rule.
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.