SELF EMPLOYED MORTGAGES

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Mortgages For The Self Employed

If you are self-employed, obtaining a mortgage requires extra documentation be provided to confirm earnings and self-employment status. Often lenders will only consider net income rather than gross income, however some will add back expenses to your net and use a higher income level. Confirming income and showing good credit history is critical to obtain mortgage financing for business owners.

Self Employed Mortgages FAQs

What is the easiest way for me to confirm income for a Self-Employed Mortgage?

Providing 2 – 3 years of Revenue Canada personal Notice of Assessments confirming sufficient income to approve the mortgage you require, is the best scenario for a lender to approve your mortgage financing.

Because I am Self-Employed, I am able to write-off expenses so my income is lower for income tax purposes. How can I be approved for a Self-Employed Mortgage?

If your Notice of Assessments do not show sufficient income to qualify you for the mortgage you require, you may have an option to be approved with a higher down payment (10%) assuming you have a high credit score

What income confirmation is required to be approved for a Self-Employed mortgage?

You will be asked to provide:

T1 Generals with statement of business activities attached for a minimum of 2 years prepared by an arm’s length third-party

Audited financial statements for the most recent 2 years, prepared and signed by a Chartered Accountant

Notice of Assessments for 2-3 years from Revenue Canada to confirm income. This document will also confirm that you have no tax liability payable

What other information will be required if I am a Self-Employed borrower?

Depending on the type of business, the following may be required:

  • Statements confirming HST and/or GST is paid in full
  • Business license and articles of incorporation
  • Accountant prepared financial statements
  • Confirmation that you are a principal owner in the business
  • Client contracts showing expected revenue for the coming years
  • Personal and business credit scores
  • Cash down payment
Are there any lenders that will consider gross income rather than net to approve my Self-Employed Mortgage?

Some lenders may allow you to add back some tax deductions to your income, like car expenses, advertising, capital cost allowances and housing expenses. Other lenders will simply allow a 15% add-back to allow for these expenses.

Are discounted rates available for a Self-Employed Mortgage application?

Interest rates offered for self-employed borrowers are the same as a regular borrower

If I cannot show enough income to qualify for a Self-Employed mortgage what are my options?

Some lenders will offer a “stated income” program specifically designed for self-employed borrowers. There are some higher costs and other requirements that you should be aware of.

Stated income applications require:

  • Minimum 10% down payment
  • Minimum 2 years of self-employment
  • The borrower is required to declare their annual income and annual business revenue, which should be reasonable based on the industry, length of operation, and type of business
  • Business to be verified by an arm’s length third-party
  • At least one borrower should have a minimum credit bureau score of 680
  • No previously bankruptcies
  • Minimum 2 trades showing on credit bureau for a minimum of 2 years
  • No revolving, or installment delinquencies on credit bureau for 12 months
  • Owner-occupied properties only
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