For self-employed individuals, obtaining a mortgage requires providing extra documentation to confirm their self-employed income and status. For self-employed Canadians, including business owners, entrepreneurs and self-employed workers, confirming self-employment income and showing good credit history is critical to obtaining mortgage financing.
If you are self-employed and want to qualify for a mortgage, contact John Antle for expert advice and guidance.
What is the easiest way for me to confirm income for a Self-Employed Mortgage?
For self-employed mortgages, providing 2-3 years of documentation (notice of assessment) from Revenue Canada to confirm business income is the best scenario for mortgage lenders to approve your mortgage financing.
As a self-employed individual, I write-off my expenses, making my income lower for income tax purposes. How can I be approved for a self-employed mortgage?
As a self-employed person, 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 will I be asked to provide 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?
Anyone who applies for a mortgage when self-employed, whether to private mortgage lenders or other financial institutions, could be required to provide the following:
- Statements confirming HST and/or GST is paid in full
- Business license and articles of incorporation
- Accountant prepared financial statements & bank 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 income to approve my self-employed mortgage?
Some lenders may allow you to add back some tax deductions to your income, such as car expenses, advertising, capital cost allowances and housing expenses. Other lenders will simply allow a 15% add-back to account for these expenses.
If I cannot show enough income to qualify for a Self-Employed mortgage what are my options?
Some lenders will offer insured “stated income” mortgages, specifically designed for self-employed borrowers. In order to qualify for a stated income mortgage, you will need to take out your own mortgage loan insurance with a private mortgage default insurer, as the CMHC does not provide mortgage default insurance for these types of mortgages. Stated income applications also 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 minimum credit bureau score of 680
- No previously bankruptcies
- Minimum 2 trades showing on credit bureau for minimum of 2 years
- No revolving, or installment delinquencies on credit bureau for 12 months
- Owner-occupied properties only
Are discounted rates available for a Self-Employed Mortgage application?
Interest rates offered for self-employed borrowers are the same as a regular borrower.
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