The client
An investor in Cobourg was refinancing a $300,000 duplex to a new balance, one property in a three-property rental portfolio, with one unit in this specific duplex currently vacant between tenants.
Subject property
$300,000 duplex, one unit vacant
Other two properties
Fully tenanted, documented leases
Unaffected by the vacancy
Qualifying income (first lender)
$5,100/month
Personal income only -- all rent excluded
Qualifying income (corrected)
$7,850/month
Includes the two fully tenanted properties' documented rent
The problem
An automated lender income tool built to flag vacancy risk is only as good as how narrowly it scopes the adjustment -- and a tool that treats one vacant unit anywhere in a borrower's investment property holdings as a reason to discount rent across the entire portfolio will misstate income on every file that includes more than one property.
What the automated read actually did
- ▸One unit in the subject duplex was between tenants, with a documented vacancy and a re-leasing plan already in motion
- ▸The other two properties in the portfolio -- four fully tenanted units, none affected by any vacancy -- had current, documented leases
- ▸The lender's automated system, on seeing the one vacant unit, excluded the rent from all three properties entirely, rather than adjusting only the actual vacant unit
The vacancy itself was real, on one unit. The income exclusion the system applied covered six.
The numbers
The qualifying mortgage payment never changed. Only how much of the portfolio's real rent the lender actually counted did.
| One vacant unit, two very different income figures | Amount |
|---|---|
| New refinance balance | $300,000 |
| Total debt service | Income wrongly scoped | Income correctly scoped |
|---|---|---|
| Qualifying income | $5,100/mo | $7,850/mo |
| Payment at the qualifying rate (7.00%), 25 years | $2,101/mo | $2,101/mo |
| Property tax + heat | $470 | $470 |
| Car loan | $245 | $245 |
| Total debt service | 55.2% | 35.9% |
55.2% is what a file looks like when every property's rent is wrongly zeroed out over one vacancy; 35.9% is the same file once income is scoped to what actually changed. The gap tracks with how much a single vacant unit can distort a multi-property file, a distortion rental vacancy rate data suggests is a real risk on any automated read that is not scoped property by property.
The solution
A mortgage agent licensed under Ontario's Mortgage Brokerages, Lenders and Administrators Act treated the vacancy as a fact about one unit, not a fact about the whole portfolio.
First, supplied documented leases for the other two, fully tenanted properties, showing their rent had nothing to do with the one vacant unit in the subject duplex.
Second, supplied the subject duplex's own re-leasing plan for its vacant unit, so the underwriter had a documented basis for that one unit specifically, rather than a blanket exclusion.
Third, moved the file to an underwriter who scoped the vacancy adjustment to that single unit only, consistent with standard rental underwriting practice for a multi-property file.
The outcome
The refinance funded at 5.00%, with the correctly scoped income restoring total debt service to 35.9%, comfortably inside range for an uninsured file.
Because this refinance is uninsured, CMHC's ratio maximums do not apply directly; the 55.2% and 35.9% figures are informational, showing exactly what correcting the vacancy scope changed.
What to take from this file
- 01A vacancy in one unit does not make an entire multi-property portfolio's rent unreliable. An income read that treats it that way is a scoping error, not a conservative underwriting choice.
- 02Documented leases on the unaffected properties are the direct fix for a portfolio-wide exclusion that should never have reached them in the first place.
- 03Ask exactly how a lender's vacancy adjustment is scoped before assuming a multi-property file will be read property by property. Automated tools do not all handle this the same way.
- 04The gap between a wrongly-scoped and a correctly-scoped figure can be the difference between a decline and an easy approval -- the underlying mortgage payment and the properties themselves never changed at all.
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:
- ▸5.00% contract rate — rates move daily; not a quote.
- ▸the automated system's portfolio-wide vacancy read — each lender's automated income tool applies its own logic for scoping a vacancy adjustment; applying it across every property in a file rather than the one vacant unit reflects a tool defect at one lender, not a universal practice.
- ▸the TDS figures — this refinance is uninsured, 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.