When two brothers set out to purchase a tenanted duplex in Prince George for $565,000, they knew it was a great investment. With $4,550/month in rental income and strong market demand, the property promised healthy cash flow and long-term value.
But to finance the purchase with 80% LTV using a mix of TFSA savings and HELOC funds, they had to navigate strict lender guidelines, short timelines, and unexpected roadblocks. This case study explores how they got it done.
The Opportunity: A Tenanted Duplex with Strong Rental Income
Purchase Price and Rental Cash Flow Overview
The property was listed at $565,000 and already tenanted, generating:
- Monthly rental income: $4,550
- Target mortgage amount (80% LTV): $452,000
- Expected monthly mortgage payment (est.): ~$1,600
This made the property cash-flow positive from the start—an ideal setup for long-term investors.
Down Payment Strategy: TFSAs + HELOC
The down payment was funded through:
- $36,000 from TFSA accounts
- $77,000 drawn from a secured HELOC on their jointly owned primary residence in the Lower Mainland
This clean and traceable structure positioned them well—until lender policies got in the way.
The First Roadblock: Lender Guidelines That Didn’t Fit
High TDS and Conservative Debt Modeling
The initial lender calculated Total Debt Servicing (TDS) over 60%, disqualifying the file. Despite both brothers being full-time salaried employees, the bank took a conservative approach and wouldn’t approve the deal.
Rental Income Not Counted from Non-Conforming Suite
The duplex had a third, non-conforming suite, which the lender refused to recognize for rental income. This made a significant dent in the rental income offset, worsening their ratios further.
Lender Policy on Non-Spousal Co-Borrowers
Since the applicants were not spouses, the lender applied stricter shelter cost allocations, adding more pressure to the qualifying ratios.
Why the Best Rate Isn’t Always the Best Option
The Initial HSBC Offer
The clients were initially pursuing a 1.49% variable rate with cashback through HSBC—one of the best market rates at the time. But low rates don’t help if the file doesn’t fit the lender’s model.
When Competitive Rates Collide with Inflexible Policies
Despite counter-calculations and clean documentation, the lender refused to bend. With subject removal looming, a fast pivot was required to keep the deal alive.
The Pivot: Using Scotiabank’s STEP Program to Save the Deal
Why Scotia Was a Better Fit for This Scenario
Scotiabank’s STEP mortgage program allowed for 50% rental offset and was more flexible with co-borrower arrangements. They were also comfortable with the property’s suite configuration and the overall credit file. Note: some of these policies have since changed.
Re-Negotiating the Purchase Price and Appraisal
The clients were able to negotiate the purchase price down to $555,000, and Scotiabank approved a mortgage of $444,000—still at a competitive 1.90% variable rate on a 5-year term.
Rapid Re-Submission and Subject Removal Extension
The file was submitted as a rush, and an appraisal was ordered immediately. Thanks to fast work from all parties, subject removal was extended, giving just enough time to secure a commitment.
Strategic Debt Restructuring to Make the Math Work
Paying Off Small Balances to Improve Ratios
To qualify under Scotiabank’s guidelines, the brothers:
- Paid off smaller balances at their existing banking institutions
- Cleared credit cards and small revolving lines
Consolidating Debt into the HELOC
They also shifted the larger LOC balance into the secured HELOC, reducing unsecured debt and improving their credit profile.
Verifying Employment and Down Payment Sources
The lender required:
- Employment letters and pay stubs from both borrowers
- 12 months of bank statements and TFSA statements to confirm the down payment source
All documentation was submitted within days to keep the file moving.
The Final Outcome: Funded Deal with a Strong Mortgage
Thanks to the lender’s responsiveness and the foresight to change mortgage strategy, the brothers met their new subject removal deadline and closed the deal just before the holidays.
Lessons for Canadian Real Estate Investors
Rate vs Flexibility: What Matters More
The lowest rate isn’t always the best fit. In fast-moving markets, flexibility, rental policy, and processing speed often matter more than a slight rate advantage.
Co-Borrowers and Lender Treatment
Non-spousal borrowers are treated differently by many lenders. Investors should be aware of how co-ownership affects qualifying ratios and costs.
Suite Legality and Rental Income Acceptance
Non-conforming suites may not count toward income. Lenders often require legal or conforming status to use rental income in underwriting.
Using HELOCs to Optimize Qualification
Using a HELOC for the down payment can be an effective strategy—but it must be disclosed, traceable, and ideally secured against your home to improve debt service ratios.
The Importance of Speed and Backup Lenders
Always have a backup lender and a contingency plan. Appraisers and underwriters are busy—don’t wait until the last minute to get approvals in place.
Do you Need a Mortgage Broker that Gets the Job Done?
The lowest interest rate won’t save your deal if the lender’s policies don’t fit your situation.
This case study shows how two brothers used strategic debt restructuring, a lender switch, and HELOC-backed funds to close on a tenanted duplex—just in time.
Here’s how we can help you too:
✅ Identify lenders that work with co-borrowers, rental offsets, and HELOC strategies
✅ Navigate income and suite qualification issues with speed and precision
✅ Protect your deal timeline with backup options and lender flexibility
Book a call and build a financing strategy that works when it matters most.
Let’s make sure your next investment deal doesn’t fall apart at the finish line.