Short answer
Because they change the borrower’s real down payment, debt load and ability to repay. A seller credit, private loan, family repayment agreement or borrowed closing cost must be disclosed and approved rather than kept outside the application.
The client problem behind the question
The mortgage fits only if a side payment or new loan remains invisible until after closing.
What the official guidance establishes
OSFI expects federally regulated lenders to assess total debt service and verify income and material information. Lenders and insurers base approval on the disclosed purchase price, funds, obligations and transaction structure.
Where the answer can change
Not every rebate or credit is prohibited. Builder incentives, lender cashback and purchase-price adjustments can be legitimate when documented and accepted. The problem is concealment or a structure that changes the economics without approval.
A practical Ontario example
Illustration only: A seller agrees to return $25,000 after closing while the mortgage is based on the full stated price. The undisclosed arrangement can distort value and down payment and create serious lender concerns.
What to do before committing
Give the broker and lawyer every amendment, credit, incentive, loan and repayment promise. If the file stops qualifying, change the lender strategy, purchase price or timing rather than hide the obligation.
Questions Rajiv would ask
- What deadline, condition or closing problem must be solved?
- Which facts are confirmed by original documents and which are still assumptions?
- Which law, insurer rule or lender policy applies to this exact transaction?
- What happens to the cash requirement and monthly payment if the first option fails?
- What is the practical route back to lower-cost financing, if temporary financing is used?
Rajiv’s broker perspective
A difficult mortgage can be solved only with accurate information. I would rather explain a real income gap, credit issue or closing shortfall to the right lender than submit a polished story that the documents do not support. The legitimate options may include another A policy, alternative/B lending, an MIC or private bridge, a larger down payment, a delayed closing or a lower purchase price.
Related: Mortgage declined? Start here · Mortgage Knowledge Centre · Real Estate Centre · Updates & Rules Centre
Would a second opinion help before you commit?
Send Rajiv the property, deadline, financing concern and the documents already available. He can identify the missing questions, compare practical mortgage routes and explain the next step in plain language.