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Self-Employed Mortgages

Being self-employed comes with its own set of challenges. Getting a mortgage is one of them. We are experts in working with self-employed individuals looking to get a mortgage.

Here’s a few topics to help answer your questions.

How To Prove Your Income As a Self Employed Person

In Canada, as in many other countries, self-employed individuals often face unique challenges when trying to secure a mortgage. While these challenges can vary based on individual circumstances and specific lenders’ policies, proving your income can be one of the most tricky.

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The Challenges prensented to self-employed mortgage seekers

  • Traditional employees have regular paystubs and a T4 slip to validate their annual income. However, self-employed individuals might have fluctuating incomes, which can be harder to prove. Lenders want assurance that borrowers have a steady income to make their mortgage payments.
  • Tax Deductions: Self-employed individuals often claim various business expenses to reduce their taxable income. While this is beneficial for tax purposes, it can reduce the income they can show to lenders, potentially affecting the mortgage amount they qualify for.
  • Lenders prefer borrowers with a steady and predictable income. Self-employed individuals might have variable monthly incomes, depending on the nature of their business. This unpredictability can be seen as a higher risk to lenders.
  • Lenders might require self-employed individuals to show financial statements for the last two to three years to assess the stability of their income.
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How to Prove Your Income

  • Most lenders mandate the inclusion of personal tax Notices of Assessment from the previous 2-3 years in the mortgage application. Individuals who furnish this income evidence typically qualify for similar mortgage products and rates as conventional borrowers. However, those unable to provide such documentation should maintain a positive credit record and offer a minimum of a 10% down payment.
    • Business financial statements.
    • Confirmation that your HST and/or GST obligations are settled.
    • Contracts indicating anticipated income for upcoming years.
    • Both your personal and business credit ratings.
    • Evidence of your ownership in the business.
    • A copy of your business’s GST license or Articles of Incorporation.
    • Documentation confirming that your down payment wasn’t a gift
    • Beyond your Notices of Assessment, lenders might request the following documents for a self-employed mortgage application:

Will My Business’ Health Affect My Mortgage Application

In Canada, the health of a business can significantly impact a mortgage application, especially for self-employed individuals. Lenders closely scrutinize the financial stability and longevity of an applicant’s business to gauge the risk of lending. A business showing steady profit and growth suggests a reliable income stream, increasing the chances of mortgage approval.

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Stability of Income

  • Lenders prefer borrowers with a steady and predictable income. Self-employed individuals might have variable monthly incomes, depending on the nature of their business. This unpredictability can be seen as a higher risk to lenders.
  • Lenders might require self-employed individuals to show financial statements for the last two to three years to assess the stability of their income.
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Business Health and Duration

  • The longevity and health of the self-employed individual’s business can impact the mortgage application. A business that has been operating for only a short period or shows signs of financial instability can be a concern to lenders.
  • Some lenders might require self-employed applicants to have been in business for a minimum number of years to be eligible for a mortgage.
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Documentation and Paperwork

  • The documentation required for a self-employed person can be more extensive than for a salaried individual. This might include business financial statements, Notices of Assessment from the Canada Revenue Agency for multiple years, business licenses, and more.
  • Gathering and presenting all the required documents can be time-consuming and might require the assistance of accountants or other professionals.
Small business, self employed person, sewing tailoring studio owner. Young fashion designer working in her studio, checking orders, getting a mortgage

How Mortgages For Less Can Help You When Others Can’t

Mortgages For Less can be particularly beneficial for self-employed individuals in Calgary when seeking a mortgage. Here are the reasons why:

Young business couple signing a contract
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Expertise in Diverse Lending Policies

  • Each lender has its criteria, and a mortgage broker is familiar with these varying policies. They can identify lenders more inclined to accommodate the financial nuances of self-employed individuals.
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Tailored Solutions

  • Self-employed incomes can be complex, fluctuating, and derived from various sources. Mortgage brokers can package this information effectively to present the borrower in the best light, highlighting their financial strengths.
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Access to a Wide Network

  • Mortgage For Less has relationships with a range of lenders, including major banks, credit unions, and private lenders. This broad network can offer more options and potentially better terms for the self-employed.
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Negotiation Skills

  • We can negotiate terms on behalf of our clients, ensuring that you get the most favorable interest rates and conditions possible.
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Time-Saving

  • Navigating the mortgage process can be time-consuming, especially for the self-employed who may face additional scrutiny. We streamline this process.
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Understanding of Documentation

  • We are well-versed in the documentation required for self-employed mortgages, ensuring that applications are comprehensive and persuasive. We will help gather necessary documents like Notices of Assessment, financial statements, and more.
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Specialized Products

  • Mortgages For Less has access to specific mortgage products tailored for self-employed individuals, such as stated income or equity-based products, which might not be easily accessible to the general public.
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Cost-Effective

  • While there’s a perception that using a broker might add to costs, this is not true. We are always compensated by the lenders. 
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Guidance and Advice

  • The mortgage landscape can be complex. Using a broker, like Mortgages For Less provide advice based on their extensive knowledge of the market, helping clients make informed decisions.
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Post-Approval Support

  • Our role doesn’t end with loan approval. We can assist with post-approval processes, ensuring a smooth path to property ownership.

Are You Wanting Personalized Help? Schedule a One-on-One Consultation

Personalized Service is what we do BEST! Mortgages for Less prides itself on our team of problem solving agents. We will answer all your questions, and guide you along this path to home ownership. We aren’t scary! We promise.