Challenges
Great Investment, Tough Lender Fit
Two brothers found a tenanted duplex in Prince George listed at $565,000. It generated $4,550/month in rent, and with a target 80% LTV mortgage of $452,000, the deal looked cash-flow positive from day one.
They planned to use:
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$36,000 from their TFSAs
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$77,000 from a secured HELOC on their jointly owned primary residence
The money was clean and traceable—but lender policy quickly became the real problem.
High TDS, Ignored Rental Income, and Co-Borrower Rules
The first lender calculated their Total Debt Service (TDS) over 60%, which pushed the file outside of policy, even though both brothers were full-time salaried employees.
The lender also:
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Refused to count rental income from the non-conforming third suite, which reduced the effective rental offset
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Applied stricter shelter cost rules because the borrowers were brothers, not spouses
On paper, this made the deal look riskier than it actually was.
When the Best Rate Doesn’t Matter
They were originally aiming for an attractive 1.49% variable rate with cashback through HSBC—one of the best market rates at the time.
But even with clean documents and counter-calculations, the lender wouldn’t budge. With subject removal approaching, the brothers risked losing the duplex unless they changed strategy fast.
Solutions
Pivoting from HSBC to Scotiabank’s STEP Program
To keep the deal alive, we switched lenders and moved the file to Scotiabank’s STEP mortgage program, which at the time offered:
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50% rental offset on the property
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More flexible treatment of co-borrowers
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Comfort with the overall file and suite setup (noting that some of these policies have since changed)
Renegotiating the Price and Restructuring Debt
To strengthen the numbers even further, we helped the brothers:
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Negotiate the purchase price down from $565,000 to $555,000
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Target a new mortgage amount of $444,000 at 1.90% variable on a 5-year term
On the liability side, they:
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Paid off smaller balances (credit cards and small revolving lines)
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Shifted the larger line of credit balance into their secured HELOC, improving their overall credit profile and debt servicing ratios
Fast Re-Submission and Documentation
Because timelines were tight, the file was submitted to Scotia as a rush, and an appraisal was ordered immediately.
The lender received:
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Employment letters and pay stubs for both brothers
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12 months of bank statements and TFSA statements to confirm the down payment
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Full disclosure and tracing of the HELOC funds
This combination of better policy fit, cleaner ratios, and a modest price reduction gave the lender confidence to approve the file in time.
Results
Deal Funded with a Competitive Rate
Thanks to the pivot to Scotia and the quick restructuring work, the brothers:
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Secured a $444,000 mortgage at 1.90% variable
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Closed on the $555,000 duplex just before the holidays
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Preserved strong cash flow from $4,550/month in rent
They didn’t get the absolute lowest rate on the market, but they got a competitive rate with a lender whose policy actually fit their situation—which is what ultimately allowed the deal to fund.
Long-Term Investment Secured
By being flexible on lender choice and proactive about debt restructuring, the brothers:
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Kept the property cash-flow positive from day one
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Used their TFSAs and secured HELOC effectively for the down payment
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Learned how co-borrower status, suite legality, and lender policy can make or break an investment deal
In the end, they walked away with a funded duplex, strong rental income, and a structure that supports their long-term investment strategy.
