The client
First-time buyers in Abbotsford-Mission found a legal duplex they planned to house-hack — living in one unit, renting the other — in a market where rental vacancy makes a second unit a real asset, not a speculative one. The catch: no tenant was in place yet, so there was no signed lease to hand the lender — only an appraiser’s opinion of market rent.
Borrowers
Two first-time buyers, T4
$8,800/mo combined income
Property
$550,000 legal duplex, Abbotsford-Mission
Living in one unit, renting the other
Down payment
$55,000 — 10%
Under 20%, file must be default-insured
Second unit
No signed lease yet
Appraiser’s market-rent opinion: $2,800/mo
Debts
Student loan $220/mo
The problem
One lender’s policy was simple and unhelpful: no signed lease, no rental income counted, full stop — regardless of what an independent appraiser said the unit would rent for.
The no-income-counted arithmetic
- ▸Housing costs: qualifying payment $3,477 + property tax $285 + heat $120 = $3,882/mo
- ▸TDS against the couple’s own $8,800/mo income: ($3,882 + $220 student loan) ÷ $8,800 = 46.6% — against CMHC’s 44% maximum. Declined.
The duplex itself wasn’t the problem, and neither was the couple’s income. The gap was entirely about documentation timing: they hadn’t found a tenant before applying, and one lender’s policy treats that exactly like a property with no rental potential at all.
The numbers
At 10% down this is an insured file, so CMHC’s 39%/44% maximums are the numbers that matter.
| Structuring the insured loan | Amount |
|---|---|
| Purchase price | $550,000 |
| Down payment (10%) | −$55,000 |
| Base mortgage (90% LTV) | $495,000 |
| CMHC premium — 3.10% in the 85.01–90% LTV band, capitalized | +$15,345 |
| Total insured mortgage | $510,345 |
| Rate & payments | Figure |
|---|---|
| Contract rate (illustrative, not a quote) | 4.69% |
| Minimum qualifying rate | 6.69% |
| Monthly P&I at the qualifying rate | $3,477 |
| Monthly P&I at the contract rate | $2,879 |
GDS — unaffected by whether the rent is counted
| GDS (subject property) | Monthly |
|---|---|
| P&I at the qualifying rate | $3,477 |
| Property tax | $285 |
| Heat (lender-standard estimate) | $120 |
| Housing costs $3,882 ÷ income with add-back $10,200 → GDS 38.1% — under 39% | ✓ |
TDS — the documentation gap, in numbers
| TDS line | No lease, no income counted | Pre-lease market-rent add-back |
|---|---|---|
| Housing costs (GDS numerator) | $3,882 | $3,882 |
| Student loan | $220 | $220 |
| Appraised market rent added to income | — | 50% of $2,800 = $1,400 |
| Income used | $8,800 | $10,200 |
| TDS vs. the 44% cap | 46.6% ✗ | 40.2% ✓ |
The solution
A submortgage broker licensed with BC’s registrar under BCFSA moved the file to a lender whose policy allows a rental offset to be built from an appraiser’s opinion of market rent when no lease exists yet — at a more conservative 50% of the appraised figure, and conditioned on the lease being signed and delivered before funding.
The appraisal itself carried the weight a lender needs: an independent, licensed opinion of achievable rent for the specific unit, not the borrowers’ own estimate. That distinction is what let the lender treat it as real income rather than speculation, similar to how our walkthrough of a rental offset that failed at one lender and passed at another plays out.
The outcome & the closing math
Approved and funded insured at 90% LTV, 25-year amortization, conditional on the lease being provided before advance — which it was, at the appraised rent. TDS moved from 46.6% under the first lender’s no-lease policy to 40.2% once the pre-lease add-back applied.
As first-time buyers on a purchase under $835,000, the couple also cleared BC’s full Property Transfer Tax exemption: the general-rate tax on this purchase would be $9,000, reduced to $0.
The lender’s condition — lease in hand before funding — meant the file still needed to close on the appraised income being real, not assumed. It was.
What to take from this file
- 01No lease is not the same as no rental potential. An independent appraiser’s opinion of market rent can carry real weight with the right lender, even before a tenant is found.
- 02Pre-lease policies are more conservative for a reason. A 50% offset on an appraised figure, versus a fuller offset once a signed lease exists, reflects the extra uncertainty — and it is illustrative, since each lender sets its own percentage.
- 03Check the first-time-buyer PTT exemption before pricing closing costs. On a purchase under $835,000, it can take the transfer tax to zero — a material number to get right for a first-time buyer’s cash-to-close.
- 04A house-hack duplex is still a subject-property file. The same underwriting question as any owner-occupied multi-unit purchase: does the lender count the other unit’s income, and on what evidence.
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.
- ▸Property Transfer Tax Act, RSBC 1996, c. 378, ss. 3(1) and 3.01(4) — BC's property transfer tax: 1% / 2% / 3% marginal brackets.
- ▸Province of British Columbia — First time home buyers' program — BC's first-time-buyer PTT exemption ($835,000 full / $860,000 partial).
- ▸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:
- ▸4.69% contract rate — rates move daily; not a quote.
- ▸50% pre-lease market-rent offset — each lender sets its own policy for counting rental income before a lease is signed.
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.