I am Self-Employed
It certainly isn’t impossible for a self-employed person to get a mortgage – but it isn't easy either.
Your accountant probably looks for as many tax deductions as they can to reduce your Taxable income. Therefore, your net income (Line 150) declared to Revenue Canada is often very low compared to your gross income. This can cause problems with your debt ratio calculations that lenders look at. Another problem is the sheer volume of paperwork the self-employed person must provide to meet lending requirements.
The good news is that a number of innovative lenders have developed specialized programs that take a simpler approach, often referred to as Stated Income programs. These programs are designed for self-employed borrowers that can demonstrate a history of managing their credit and finances responsibly. Eligible borrowers have typically owned a small business for a minimum of two years, which can be confirmed through third-party documentation.
Self-employed borrowers can finance up to 90% of the home's value on a Purchase transaction, and up to 80% on a mortgage Refinance/Renewal, depending on the borrower's credit score.
On a Purchase, you need a 10% down payment. Minimum 5% must come from your own resources, but the other 5% could be a gift from an immediate family member.
Getting help from an expert
We recommend that professional help be sought from the outset. The complexities of getting a mortgage for a self employed person usually means that you need an expert to put it together.
Your Mortgage Managers broker will know which lenders and insurers apply which rules; which lenders will use the latest year’s figures if they’re better than the year before, instead of averaging; and which lender will use one year’s trading instead of two. Also, they’ll know which lenders will add depreciation and other non cash-flow items back into income.
When applying for a mortgage, your Mortgage Managers broker will need to obtain some documentation from you in order to complete your credit application accurately. Please download a copy our our Required Document Checklist from our Library.