Self-Employed

Being self-employed and qualifying for a mortgage can sometimes feel like a ‘Catch 22’.  If you are smart, you work hard to minimize your taxable income but then the banks use your minimized taxable income to measure your ability to service a mortgage.

This has led some entrepreneurs to pay extra taxes just to prove sufficient income in the eyes of a rigid bank policy to qualify for a mortgage.

Luckily, the millions of Canadians taking the plunge into self-employment have forced the banks and Canadian Mortgage and Housing Corporation (CMHC) to develop special lending programs that are better suited to a self-employed person’s needs and abilities.

There are many kinds of self-employment programs, but one thing that they all have in common is greater flexibility in the way income is calculated. This is done by allowing something called ‘gross-ups’ of income or expense ‘add-backs’ or just stated income with little or no documentation.

The key factors that go into qualifying for an excellent mortgage under a self-employment program are:

Credit Quality – The best programs demand excellent credit scores.

CCRA Notice of Assessments – Many programs require proof that personal income taxes have been filed and are paid up to date.

Verification of business for self or self-employment– Some programs require proof that a business has been registered with the provincial or federal government via incorporation, registration or GST number.  Almost all lenders want to see proof on the tax forms or on the credit bureau that the applicant truly has been self-employed for at least two years.  An exception to this can sometimes be made if the self-employment is a continuation of a prior established career in the same line of work.

Minimum liquid assets – Some programs require applicants to have at least 6 months of mortgage payments in savings of some kind at the time of the mortgage closing.

Property type – Most lenders require properties purchased or refinanced under self-employment programs to be located in populated areas, held in personal name, owner occupied and no more than two units.

These are just a few of the options open to self-employed individuals. Your RateMiser Mortgage Advisor will help you discover the best self-employment program to accomplish your needs and goals.

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