The client
An investor in Greater Sudbury held a $385,000 rental property carrying a $210,000 conventional mortgage, refinancing to fund a second property's down payment.
Current value
$385,000, Greater Sudbury
Existing rental, correctly financed conventionally from day one
Existing balance
$210,000
Refinance ceiling assumed
90% LTV
Based on the strength of the equity position -- never actually available
Refinance ceiling that applied
80% LTV
Lender's own conventional refinance policy
The problem
Refinances are never eligible for default insurance at any of the three insurers, regardless of how much equity a property carries. Insured leverage is a purchase-side product; the ceiling on a refinance is set by the lender's own conventional policy alone.
What the equity position could not buy
- ▸The property's strong 45%+ equity position led the investor to assume a higher, insured-style loan-to-value would be available
- ▸No insurer offers default insurance on any refinance, at any loan-to-value, however low the risk actually looks
- ▸The conventional refinance ceiling that actually applied was set entirely by the lender's own policy, not by the property's equity
The equity was real. The insured-level leverage the investor had budgeted around was never available to spend.
The numbers
Sizing the refinance against the real 80% ceiling, rather than the hoped-for 90%, is what actually determined how much cash was available for the second property.
| The refinance, at the ceiling that actually applies | Amount |
|---|---|
| New balance at 80% conventional LTV | $308,000 |
| Existing balance retired | $210,000 |
| Cash out available | $98,000 |
| At the real 80% ceiling | At the hypothetical (unavailable) 90% | |
|---|---|---|
| New balance | $308,000 | $346,500 |
| Cash out | $98,000 | $136,500 |
| Gap | -- | $38,500 |
The $38,500 gap is the entire lesson: at a qualifying payment of $2,195/mo, total debt service on the refinanced property settles at 22.0% -- comfortably inside range, consistent with how thin loan-to-value exposure typically runs on a well-equitied rental -- but the ratios were never the constraint. The insurability of the transaction type was.
The solution
A mortgage agent licensed under Ontario's Mortgage Brokerages, Lenders and Administrators Act confirmed the ceiling that actually applies to a refinance before the second property's own down payment plan was finalized.
First, confirmed with the lender that no refinance structure -- however strong the equity -- reaches an insured-level loan-to-value. The 90% figure the investor had budgeted around was never available on any refinance, at any lender.
Second, resized the second property's own down payment plan around the real $98,000 available, rather than the $136,500 the equity position alone had suggested.
Third, confirmed the lender's own specific 80% conventional refinance policy in writing, since this ceiling is set by the individual lender, not by any insurer or universal rule.
The outcome
The refinance funded at 5.20% on the new $308,000 balance, releasing $98,000 in cash toward the second property's down payment, with total debt service on the first property at 22.0%.
Because this file is uninsured, CMHC's ratio maximums do not apply directly; the 22.0% figure is informational, showing there was ample qualifying room left on the file the equity had already suggested was strong.
What to take from this file
- 01A refinance is never eligible for default insurance, at any of the three insurers, at any loan-to-value. Strong equity changes the risk; it does not change the transaction's insurability.
- 02The conventional refinance ceiling is set by the individual lender, not a universal rule. Confirm the specific policy before sizing a client's expectations around it.
- 03Size a second property's down payment plan around what a refinance can actually release, not what the equity position suggests it should. The two numbers are not the same question.
- 04A well-qualified refinance can still fall well short of a client's plan. Comfortable ratios do not mean the cash-out figure the client is hoping for is actually available.
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:
- ▸5.20% contract rate — rates move daily; not a quote.
- ▸the 80% conventional refinance ceiling — each lender sets its own uninsured refinance LTV policy; there is no single published percentage.
- ▸the 90% hypothetical figure — shown only to size the gap -- no insurer offers default insurance on any refinance, at any LTV.
- ▸the 22.0% total-debt-service figure — this file is uninsured, so there is no CMHC ratio ceiling -- the number is 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.