Mortgage for Self-Employed

Today more and more Canadians are opting to work for themselves or go on contract with their existing companies rather than receive a salary. There are certainly some advantages to being business-for-self. Perhaps the greatest being the ability to write-off many personal expenses and ultimately pay less income tax. The other side of this is that these great benefits actually make these same business owners work hard to qualify for a mortgage, all because their income is significantly reduced on paper. These business owners know that there is advanced planning involved in being able to qualify for conventional financing.

Fortunately, there are options and we offer loan programs specifically for the Self employed. Approvals are based on factors such as good credit, length of time in business, and the property type and location rather than business financials or tax returns alone.

How to Show Enough Income

Being self-employed does not mean that you have to show enough income on your T1 General in order to qualify for a mortgage. There are many factors involved in showing income when you are self-employed. There are some strategies that you can plan ahead and be prepared when you as a self-employed is ready to move forward in arranging mortgage.

  • Plan is to write off fewer expenses in the two years leading up to the property purchase.
  • Ask your Mortgage Broker about STATED INCOME. There are options with some lenders to State your income. This is based on you being in the same profession for at least two years previous to being self-employed.
  • Be prepared for higher interest rates. Those that are not conventional are seen as a risk and, therefore, are applied to a higher interest rate.
  • Although, lenders generally do not like bankruptcy; however, some lenders will overlook this if there has been consistent and excellent credit since the time of bankruptcy and you have been fully discharged from the bankruptcy for a specific time period. Make sure you keep ALL Bankruptcy papers easily available along with your discharge papers.

Mortgage Insurance Rates for Self-Employed

 

Self-employed mortgages with proof of income

If you can provide sufficient proof of income, including your Notices of Assesesment, all three mortgage default insurance providers (Canada Mortgage and Housing Corporation (CMHC), Genworth Canada or Canada Guaranty) offer the following rates:

Down Payment Insurance Premium 
5%-9.99% 4.00%
10%-14.99% 3.10%
15%-19.99% 2.8%
20% or Higher 0.00%

Self-employed mortgages without proof of income

If you can provide sufficient proof of income, including your Notices of Assesesment, all three mortgage default insurance providers (Canada Mortgage and Housing Corporation (CMHC), Genworth Canada or Canada Guaranty) offer the following rates:

Down Payment Insurance Premium 
5%-9.99% N/A
10%-14.99% 5.45%
15%-19.99% 3.35%
20% or Higher 1.90%

 

 

 

 

 

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