Higher than the T1 line said

The bank’s intake ran the file on qualifying income of $5,125 a month — the two-year average of line 15000 on her T1 Generals, and nothing else. A sole proprietor’s line 15000 is net business income after every deduction the Income Tax Act allows, including capital cost allowance and a business-use-of-home claim — both of which reduce taxable income without reducing the cash actually available to service a mortgage.

Nothing about her business had changed in seven years — the decline was purely a function of which number the intake process picked up. The couple assumed the file was dead until a second opinion asked the one question the first lender never did: what does the T1 actually leave out?

At 10% down this is an insured file, so CMHC’s maximums — GDS 39%, TDS 44% — are hard ceilings rather than one lender’s preference, and at least one borrower or guarantor needs a credit score of 600 or higher. Her rebuilt, always-current credit clears that floor without difficulty. At $292,288, this is also a fairly ordinary size of file — well inside the range of a typical average new mortgage amount in Canada — which is exactly why the decline was a documentation story, not a risk one.

Checks along the way: minimum down payment on a $315,000 purchase is $15,750 — 5% of the price, since it sits under the $500,000 tier boundary — so $31,500 clears it twice over. Payment computed the Canadian way: semi-annual compounding, 25-year amortization, rounded to the nearest dollar.

GDS as filed — line 15000 alone

The add-back math

Treatment of self-employed add-backs differs by lender and insurer — there is no single published table — but capital cost allowance and business-use-of-home are two of the most commonly accepted add-back categories, provided they are documented on the T2125 and confirmed by an accountant’s letter.

GDS / TDS after the add-back

Both ratios now clear CMHC’s 39% / 44% ceiling with real margin — 1.6 points on GDS, 1.2 on TDS. The file didn’t need a B-lender; it needed the second income category the first submission never counted.

A mortgage broker licensed under Manitoba’s Mortgage Brokers Act, regulated by the Manitoba Securities Commission, took the file after the decline and did the work the original submission skipped.

First, re-ran the income two ways. Line 15000 alone versus line 15000 plus documented add-backs — the gap between 45.9% and 37.4% GDS showed exactly how much of the decline was a documentation problem rather than a genuine affordability problem.

Second, built the add-back file properly. Two years of T1 Generals with statements of business activities (T2125), the CCA schedules supporting the $9,800/yr claim, the business-use-of-home worksheet supporting the $4,200/yr claim, and a signed accountant’s letter confirming both were legitimate, recurring add-backs rather than one-time adjustments.

Third, stayed with an A-lender. Because the corrected ratios cleared the insured 39%/44% ceiling comfortably, there was no need to move the file to a B-lender at a higher rate — the fix was in the paperwork, not the pricing tier.

Approved and funded: insured at 90% LTV, 25-year amortization. Manitoba is the one province in this file set that charges no retail sales tax on the default-insurance premium — RST on mortgage insurance was eliminated there in July 2020 — so the closing-cash picture was lighter than the same file would have been in Ontario, Quebec or Saskatchewan.

The $8,788 premium itself is capitalized into the mortgage, as always. With no RST layered on top of it, this file's cash-to-close was the land transfer tax and legal costs only — not a third line item some of the other provinces in this file set carry.

• 01Line 15000 alone can understate a sole proprietor’s real qualifying capacity. Capital cost allowance and business-use-of-home both reduce taxable income without reducing the cash available to carry a mortgage — but which add-backs a given lender accepts, and how, is illustrative and lender-specific, not a published rule.
• 02Run the ratio both ways before assuming a decline is final. This file moved from 45.9% to 37.4% GDS purely by adding two documented income categories — nothing about the borrower’s business changed.
• 03A GDS decline is not automatically a B-lender file. Check whether the true income, properly documented, clears the A-lender bar first — moving to B pricing when the fix was in the paperwork costs the client money for nothing.
• 04Manitoba charges no RST on default insurance. Only Ontario, Quebec and Saskatchewan currently tax the premium — know which province you’re in before you estimate a client’s closing cash.
• 05A full paper trail turns an add-back from an assertion into an underwritable number. Two years of T1 Generals, the T2125, the CCA schedule and an accountant’s letter are what an underwriter actually needs to sign off on income the T1 doesn’t show.