Self Employed Mortgages
Small and medium-sized businesses are the engine of the Canadian economy.
There are several different mortgage options for self-employed homebuyers, depending on how much down payment is available, how the business is structured and how it is reported to Revenue Canada.
Here are some quick facts:
Down payment – can be as low as 5% if there is enough taxable income to qualify for the mortgage amount required. (See High-Ratio Mortgages)
Qualifying income – will be an amount between your gross business income and your net taxable income (line 150 on your T-1).
- In some cases we can gross up a 2 or 3 year average by 15%
- In others we can “state” an income if the down payment is 10% or over (and 5% of that is from your own resources). This would be an insured mortgage. (High ratio, default insured).
- For borrowers with a down payment of 35% or more there are some equity programs available that are a bit more lenient on the amount of incom
- It is important to have congruency in how you report the income. If you all of a sudden switch to dividend income, for example, expect to show at least 2 years of reporting this way.
Documents – It is very important to have pertinent documents available –
- 2 years of Revenue Canada Notice of Assessments are almost always mandatory to show proof of having filed tax returns and that there are no taxes owing to Revenue Canada.
- Generally you will also be asked for the matching T-1 Generals. A few lenders require 3 years.
- Other forms of proof of business for self that are acceptable can be GST returns, Articles of Incorporation if you have a company, etc.
Credit – Good credit history not only affects interest rate these days, but also the mortgage options that are available to you. Unexpected challenges and incorrect reporting can show up in your credit score. Get it checked by your mortgage broker ahead of time.
Alternate Mortgage Lenders – sometimes can be an option (short term) if there is a shortfall in income, credit or documentation.
Be pro-active – It’s a good idea to ask questions and get pre-qualified before you go shopping.
Your home. Your mortgage. Our passion!
Self-Employed Mortgages October 2, 2017