The client
A forestry contractor working the harvest around Miramichi, paid by several different mills over the course of a year, each issuing its own T5018 Statement of Contract Payments. Two filed T1 years show net contracting income of $54,000 and $72,000 — solid, but scattered across paperwork from multiple payers that didn’t obviously line up with the bank deposits.
Business
Forestry contractor, sole proprietorship
Paid by several mills, multiple T5018 slips per year
Two filed years
$54,000, then $72,000
Two-year average $5,250/mo
Credit picture
Good standing, one equipment loan
Equipment loan $380/mo
Purchase
$245,000, Miramichi
Property tax $160/mo; lender heat estimate $95/mo
Down payment
$24,500 — 10%
Under 20%, so the file must be default-insured
Regulator
New Brunswick mortgage associate
Financial and Consumer Services Commission of New Brunswick (FCNB)
The problem
The first underwriter, faced with T5018 slips from three different mills that didn’t individually match the bank deposits (payments arrived net of harvest-related deductions, staggered across weeks), couldn’t reconcile the paperwork with confidence — and fell back on a conservative haircut instead.
The unreconciled haircut
- ▸Two-year average net income: ($54,000 + $72,000) ÷ 2 = $63,000/yr, $5,250/mo
- ▸A 50% haircut applied for unreconciled multi-payer income: $2,625/mo
- ▸TDS: 86.7% against CMHC’s 44% maximum. Declined.
The income itself was never in doubt — two consecutive filed years, both assessed by the CRA, and both built the way our guide to calculating self-employed income from a T1 and T2 lays out. What tripped the file was documentation: three mills' worth of T5018s, each with its own timing and deduction pattern, is genuinely harder to trace to a bank statement than a single employer's T4. Our piece on contract and T4A income and proving continuance covers the documentation challenge multi-payer contract income creates, and our piece on rebuilding a file when the two-year average is unusable covers what happens when that documentation gap cannot be closed at all.
The numbers
At 10% down this is an insured file: CMHC’s maximums — GDS 39%, TDS 44% — apply as hard numbers.
| Structuring the insured loan | Amount |
|---|---|
| Purchase price | $245,000 |
| Down payment (10%) | −$24,500 |
| Base mortgage (90% LTV) | $220,500 |
| CMHC premium — 3.10% in the 85.01–90% LTV band, capitalized | +$6,836 |
| Total insured mortgage | $227,336 |
The minimum down payment at this price is $12,250 — 5% of the purchase price, since $245,000 sits under the $500,000 tier boundary — so $24,500 clears it comfortably.
| Rate & payments | Figure |
|---|---|
| Contract rate — 5-year fixed (illustrative, not a quote) | 5.35% |
| Minimum qualifying rate — greater of contract + 2% and 5.25% | 7.35% |
| Monthly P&I at the qualifying rate — the ratios run on this | $1,642 |
| Monthly P&I at the contract rate — what he actually pays | $1,368 |
Income — the haircut vs. the reconciled figure
| Income treatment | Monthly |
|---|---|
| Two-year average net income ($54,000 + $72,000 ÷ 2) | $5,250 |
| 50% haircut for unreconciled multi-payer income | $2,625 |
| Fully reconciled two-year average | $5,250 |
TDS — the haircut vs. the reconciled figure
| TDS line | 50% haircut applied | Fully reconciled income |
|---|---|---|
| Housing costs (PI + tax + heat) | $1,897 | $1,897 |
| Equipment loan | $380 | $380 |
| Income used | $2,625 | $5,250 |
| TDS vs. the 44% cap | 86.7% ✗ | 43.4% ✓ |
GDS on the fully reconciled income comes to 36.1%, inside the 39% cap. Once every T5018 was matched to its corresponding deposit, the income wasn’t discounted at all — the haircut disappeared entirely, because it existed only to cover for paperwork the first lender couldn’t trace, not because the money wasn’t real.
The solution
A New Brunswick mortgage associate, licensed with the FCNB, treated the file as a reconciliation problem rather than an income problem from the outset.
First, obtained every T5018 slip from every mill for both filed years — not just a summary, but each individual statement of contract payments.
Second, matched every slip to its corresponding bank deposit, accounting for the timing lag and the harvest-related deductions each mill applied before payment — the exact gap that had confused the first underwriter.
Third, placed the fully reconciled file with a lender comfortable with multi-payer T2125 contract income, submitting the reconciliation itself as part of the package rather than leaving the underwriter to attempt it independently:
The outcome & the closing math
Approved and funded: insured at 90% LTV, 25-year amortization, 5-year fixed, for a mortgage that can be weighed against our data on the average new mortgage amount in Canada. The last piece of broker work was confirming the cash needed at closing beyond the down payment.
| Cash due at closing (beyond the down payment) | Amount |
|---|---|
| New Brunswick real property transfer tax on $245,000 — flat 1% on the greater of price or assessed value | $2,450 |
| Legal fees, title insurance & adjustments | varies |
What to take from this file
- 01A haircut on unreconciled income is a documentation fix waiting to happen, not a verdict on the borrower. This file swung from 86.7% to 43.4% TDS once the paperwork, not the income, was resolved.
- 02Multi-payer T5018 income needs its own reconciliation schedule. Matching every slip to its deposit is the single document that unlocks a file like this.
- 03Two consecutive filed years, even from several payers, is still the standard convention. The number of payers doesn’t change the averaging window — only the documentation burden.
- 04Budget New Brunswick’s flat 1% transfer tax as real cash at closing. $2,450 was due on top of the down payment.
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%.
- ▸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.
- ▸CMHC — CMHC Home Start — minimum down payment tiers (5%/10%) and the $1.5M insured price cap.
- ▸CMHC — Purchase (Mortgage Loan Insurance) — default-insurance premium schedule by LTV band (25-year amortization).
- ▸Real Property Transfer Tax Act, S.N.B. (via laws.gnb.ca) — New Brunswick's flat 1% real property transfer tax.
Illustrative in this file — lender-specific, not rules:
- ▸5.35% contract rate — rates move daily; not a quote.
- ▸50% haircut on unreconciled income — an internal conservative-underwriting convention, not a published rule.
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.