The client
An unincorporated contractor in Cornwall buying a $425,000 home at 10% down, funding the down payment directly from the business's own operating bank account.
Purchase price
$425,000, Cornwall
10% down, insured
Down payment source
Business operating account
Same account also held GST/HST collected from clients
Two-year-average qualifying income
$8,500/month
Other debt
$220/mo car loan
The problem
For a sole proprietor, a business's operating account and the owner's own money are, legally, the same pool -- but that same account also holds GST/HST collected from clients on recent invoices, money that is owed to CRA rather than freely the owner's to spend.
What the withdrawal alone could not answer
- ▸The $42,500 down payment came straight out of the business's operating account
- ▸That account's balance at any given moment includes GST/HST collected from clients, not yet remitted
- ▸A withdrawal that happened to include HST-in-trust dollars would still be legal for a sole proprietor to make -- but it would leave the business short when the remittance came due
Nobody suggested the withdrawal was improper. The lender's own source-of-funds review just needed to know which dollars in that account were actually available to spend.
The numbers
Once the withdrawal was confirmed as net proceeds rather than HST-in-trust money, the insured purchase math itself was routine.
| The insured purchase, source confirmed | Amount |
|---|---|
| Base mortgage (90% of purchase price) | $382,500 |
| CMHC premium (3.10% at 90% LTV) | +$11,858 |
| Total insured mortgage | $394,358 |
| Ratio check at the qualifying rate | Figure |
|---|---|
| Payment at the qualifying rate (6.90%), 25 years | $2,738/mo |
| GDS (payment + $290 tax + $115 heat) ÷ $8,500 income | 37.0% |
| TDS (GDS numerator + $220 car loan) ÷ $8,500 income | 39.6% |
37.0% and 39.6% sit comfortably inside CMHC's 39% GDS and 44% TDS maximums -- the ratios were never in doubt; confirming whose money was actually in the account was the real work on this file.
The solution
A mortgage agent licensed under Ontario's Mortgage Brokerages, Lenders and Administrators Act treated the business account withdrawal as a documentation question, not an assumption to wave through.
First, pulled the business's recent GST/HST return and remittance schedule, showing how much of the account's balance at the time of withdrawal was collected tax owed to CRA versus the owner's own net proceeds.
Second, reconciled the $42,500 withdrawal against that schedule, confirming the amount withdrawn came from net proceeds already clear of any HST collected and outstanding.
Third, obtained a short accountant's letter confirming the reconciliation, alongside the same T1/T2 income documentation already being used for the two-year income average, so both questions drew on one consistent paper trail.
The outcome
The purchase funded insured at 37.0% GDS and 39.6% TDS, with the down payment confirmed as the owner's own money and the business's HST remittance obligation untouched.
Both ratios sit comfortably inside CMHC's 39% GDS and 44% TDS maximums; the file was never close to either ceiling once the source-of-funds question was resolved.
What to take from this file
- 01A sole proprietor's business account and personal funds are legally the same pool -- but not every dollar in it is freely available. GST/HST collected from clients is money owed to CRA, sitting in the same account as the owner's own proceeds.
- 02Reconcile a down-payment withdrawal against the business's own GST/HST remittance schedule, not just its bank balance, before assuming the withdrawal is clean.
- 03An accountant's letter documenting the reconciliation is worth more than a bank statement alone. The bank statement shows the withdrawal happened; the letter shows what kind of money it actually was.
- 04This distinction matters for a sole proprietor precisely because there is no separate corporate structure to keep the two pools apart. The documentation has to do the separating instead.
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.
- ▸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.
- ▸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.
Illustrative in this file — lender-specific, not rules:
- ▸4.90% contract rate — rates move daily; not a quote.
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.