The client
A framing and siding contractor near Selkirk, whose spouse holds a T4 job, works a construction season that runs from spring thaw to the first hard frost — and effectively nothing in between. Their first lender read the near-zero winter revenue as a business interruption and declined before the file reached ratios.
Borrowers
One T4-salaried spouse, one trades sole proprietor
Framing/siding, spring-to-fall season
T4 income
$46,000 / year
$3,833 per month
T2125 net income, Year 1
$61,000
CCA on tools and vehicle: $11,000
T2125 net income, Year 2
$54,000
CCA on tools and vehicle: $9,000
New purchase
$475,000 detached, Selkirk
Property tax $320/mo; heat estimate $140/mo
Down payment
$47,500 — 10%
Under 20%, so the file must be default-insured
The trades sole-proprietorship, two years of T2125 net income:
| T2125 net income | Year 1 | Year 2 |
|---|---|---|
| Net income before CCA add-back | $61,000 | $54,000 |
| CCA claimed on tools and vehicle | $11,000 | $9,000 |
| Net income with CCA added back | $72,000 | $63,000 |
The problem
A construction trade in this region simply doesn't run in January. The first bank's underwriting overlay flagged four consecutive months of near-zero deposits into the business account every year as a possible closure or gap in self-employment, and asked for an explanation before it would even calculate ratios — then declined once the raw, un-adjusted two-year average came in short.
The raw-income arithmetic
- ▸Two-year average, no CCA add-back: ($61,000 + $54,000) ÷ 2 = $57,500/yr — $4,792/mo
- ▸Combined with the $3,833/mo T4 income: $8,625/mo
- ▸TDS: 46.0% — against CMHC’s 44% maximum. Declined.
Two things were wrong with the first read. The winter gap is normal and recurring, not a business interruption — every roofing, framing and siding contractor in the region shows the same pattern. And the net income itself hadn't been adjusted for CCA on tools and a work vehicle, both genuine business assets whose depreciation lowers taxable income without lowering what the business actually earns.
The numbers
At 10% down this is an insured purchase, so CMHC's maximums — GDS 39%, TDS 44% — are hard caps.
| Structuring the insured loan | Amount |
|---|---|
| Purchase price | $475,000 |
| Down payment (10%) | −$47,500 |
| Base mortgage (90% LTV) | $427,500 |
| CMHC premium — 3.10% in the 85.01–90% LTV band, capitalized | +$13,252 |
| Total insured mortgage | $440,752 |
| Rate & payments | Figure |
|---|---|
| Contract rate — 5-year fixed (illustrative, not a quote) | 4.99% |
| Minimum qualifying rate — greater of contract + 2% and 5.25% | 6.99% |
| Monthly P&I at the qualifying rate — the ratios run on this | $3,084 |
| Monthly P&I at the contract rate — what they actually pay | $2,561 |
Raw income vs. the tool-and-vehicle add-back
The standard self-employed add-back applies here to CCA on tools and the work vehicle — both genuine business assets.
| Income treatment | Raw T2125 | With CCA added back |
|---|---|---|
| Two-year average, annual | $57,500 | $67,500 |
| Two-year average, monthly | $4,792 | $5,625 |
| Combined with the $3,833/mo T4 income | $8,625 | $9,458 |
| GDS | 41.1% | 37.5% |
| TDS vs. the 44% cap | 46.0% ✗ | 41.9% ✓ |
Adding back the tool and vehicle CCA moves TDS from a declined 46.0% to an approved 41.9%, with roughly two points of room under the cap.
The solution
A Manitoba Securities Commission-licensed mortgage broker addressed the seasonality question and the income math as two separate problems.
First, documented the season as normal, not exceptional. A short letter, corroborated by multiple years of the same pattern, showed the winter gap recurs every year and always has — it is how this trade works, not a sign of instability.
Second, moved the file to a lender whose self-employed policy adds back CCA on tools and vehicles. Knowing which lender's policy fits a trades file is exactly the kind of judgment behind the share of Canadian mortgages brokers place, and a standard two-year average run properly already smooths the season-to-season swing; the add-back was the missing second half.
Third, packaged both pieces of evidence together so the underwriter saw the seasonality explanation and the corrected math in the same submission.
With the seasonality contextualized and the add-back documented, the insurer's approval followed the lender's.
The outcome & the closing math
Approved and funded: insured at 90% LTV, 25-year amortization, 5-year fixed term.
| Cash due at closing (beyond the down payment) | Amount |
|---|---|
| Manitoba land transfer tax on $475,000 — marginal brackets | $7,150 |
| Manitoba retail sales tax on the insurance premium — Manitoba charges none, unlike Ontario's 8% RST | $0 |
| Legal fees, title insurance & adjustments | varies |
The lender also required evidence of funds to cover closing costs on top of the $47,500 down payment, which the same 90-day statements demonstrated.
What to take from this file
- 01A recurring seasonal revenue gap is normal for a trade, not a red flag. Document the pattern across multiple years rather than letting an automated overlay read it as instability.
- 02The tool-and-vehicle CCA add-back is standard for trades sole proprietors. Skipping it understates income by exactly the amount of a legitimate, non-cash deduction.
- 03The ratios run at the qualifying rate, not the contract rate. This file qualifies at 6.99% and pays at 4.99%.
- 04Manitoba charges no retail sales tax on the default-insurance premium. Unlike Ontario's 8% RST, that's one line of cash-to-close this file didn't need to budget for.
- 05Two separate problems need two separate fixes. Documenting the season didn't fix the ratios, and the CCA add-back didn't explain the winter gap — both were needed.
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 Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸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.
- ▸Government of Manitoba — Land Transfer Tax — Manitoba's land transfer tax brackets (no first-time-buyer rebate).
- ▸Government of Manitoba, Manitoba Finance Taxation Division — Notice RST 20-04, "Removal of RST from Residential and Business Property Insurance" (Issued April 2020) — Manitoba charges no retail sales tax on default-insurance premiums (since July 2020).
Illustrative in this file — lender-specific, not rules:
- ▸4.99% contract rate — rates move daily; not a quote.
- ▸full CCA add-back on both years — each lender publishes its own self-employed add-back policy.
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.