The client
Investors buying a $415,000 non-owner-occupied duplex in Windsor, Ontario, inheriting two continuing tenancies. Unit 2's rent was straightforward; unit 1's was not, because its signed lease and its actual legal rent had quietly stopped matching.
Purchase price
$415,000
Windsor, non-owner-occupied
Down payment
$83,000 (20%)
Conventional, uninsured
Unit 1 signed lease
$1,650/mo
The figure still printed on the lease
Unit 1 LTB-approved rent
$1,810/mo
Above-guideline increase, already in effect
Unit 2 rent
$1,450/mo
Unaffected, ordinary continuing tenancy
The problem
Ontario's Landlord and Tenant Board had approved unit 1's landlord to raise its rent for a roof-replacement capital expenditure -- an above-guideline increase, legally payable by the tenant from a specific effective date already passed. What hadn't happened yet was paperwork: the lease document itself, the piece of paper a lender's checklist usually asks for, still showed the old $1,650 figure, because nobody had gotten around to reprinting it.
Two documents, two different rents
- ▸The signed lease: $1,650/mo -- the number on the paper, unchanged since before the increase was approved
- ▸The LTB order: $1,810/mo -- the number the tenant is legally obligated to pay, effective before this closing
- ▸A lender reading only the lease would qualify the file on rent the tenant no longer legally owes at the lower figure
The gap was real but modest -- an above-guideline increase for one capital project, not a wholesale rent reset. That made it easy to miss and just as easy to fix, once someone actually pulled the LTB's own order rather than relying on the lease alone.
The numbers
Once the rental offset was run against the LTB-approved rent instead of the stale lease figure, the file's own carrying-cost math shifted by exactly as much as the increase itself -- no more, no less.
| Offsetting the correct rent | Amount |
|---|---|
| Qualifying payment at 7.05%, 30 years | $2,197/mo |
| Property tax and heat | $480/mo |
| Rent recognized -- signed lease ($1,650 + $1,450), 50% offset | $1,550/mo |
| Rent recognized -- LTB order ($1,810 + $1,450), 50% offset | $1,630/mo |
| Total debt service | Signed lease only | LTB-approved rent |
|---|---|---|
| Housing cost after rental offset | $1,127 | $1,047 |
| Car loan | $260 | $260 |
| Total debt service | 16.9% | 15.9% |
A one-point swing on a $415,000 file is not what decides an approval on its own -- this purchase was never close to a decline either way, and Windsor's own rental vacancy rate only reinforced how little risk either unit carried. What the LTB order actually did was replace a number the tenant no longer owed with the number they did, on a file where getting the documentation right mattered more than the size of the swing.
The solution
A mortgage agent working under Ontario's Mortgage Brokerages, Lenders and Administrators Act treated the lease and the LTB order as two separate documents answering two separate questions.
First, requested the LTB's own approval order directly from the seller's property manager. Confirmed the above-guideline increase's exact effective date and approved amount, rather than taking the landlord's word for what the new rent was supposed to be.
Second, confirmed the increase was already in effect, not merely approved. An LTB order approving a future increase and one confirming a rent already payable are different things; only the latter is something a lender can rely on today.
Third, moved the file to a lender whose rental offset policy will credit an LTB-ordered rent once shown the order itself. Not every lender's checklist has a box for that; the ones that do simply asked for the order.
The outcome
The purchase funded conventionally at 5.05%, qualified on the LTB-approved rent at 15.9% total debt service, with Ontario's land transfer tax on the purchase coming to $4,775.
This is an uninsured, non-owner-occupied purchase, so CMHC's ratio maximums don't apply here; both total-debt-service figures are informational, showing the modest but real effect of using the legally correct rent.
What to take from this file
- 01A signed lease and the legally payable rent can diverge. An LTB-approved increase takes effect on its own order, not on whenever someone reprints the lease.
- 02Confirm an increase is in effect, not just approved. A future effective date is not something a lender can credit at today's closing.
- 03Pull the LTB order itself, not the landlord's summary of it. The order is the only document that actually proves the amount and the date.
- 04Not every lender's rental-offset policy has a box for an LTB order. Confirm the policy before submitting, not after a file stalls on a documentation gap.
- 05A modest, legitimate rent increase produces a modest, legitimate ratio change. The point of getting it right is accuracy, not a dramatic swing.
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%.
- ▸Ontario.ca — Calculating Land Transfer Tax / Land Transfer Tax Refunds for First-Time Homebuyers — Ontario's marginal land transfer tax brackets and first-time-buyer refund.
- ▸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:
- ▸5.05% contract rate — rates move daily; not a quote.
- ▸the 50% rental-income offset — each lender publishes its own offset percentage against rental income; there is no single published rate.
- ▸the total debt service figures — this is an uninsured, non-owner-occupied purchase, so there is no CMHC ratio ceiling -- the numbers are 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.