Self-Employed and Seeking a Mortgage.

Approximately 20% of Canadians are self-employed, making this an important segment in the mortgage and financing space. When it comes to self-employed individuals seeking a mortgage, there are some key things to note as this process can differ from the standard mortgage.

Qualifying for a Mortgage

In order to obtain a mortgage as a self-employed individual, most lenders require personal tax Notices of Assessment and respective T1 generals be included with the mortgage application for the previous two years. Typically, individuals who can provide this proof of income – and with acceptable income levels – have little issue obtaining a mortgage product and rates available to the traditional borrower.

Self-Employed Categories

For those self-employed individuals who cannot provide the Revenue Canada documents, you will be required to put down 20% and may have higher interest rates.
If you can provide the tax documents and don’t have enough stated income, due to write-offs, but you do have at least a 10% down payment, then there could be additional "specialty" options to help you qualify or more with standard interest rates.
If you can provide the tax documents, and you have high enough income, then there are no restrictions.

Documentation Requirements

For those individuals who are self-employed, you must provide the following, in addition to your standard documentation:

For incorporated businesses – two years of accountant prepared financial statements (Income Statement and Balance Sheet)
Two most recent years of Personal NOAs (Notice of Assessments) and Full T1's
Potentially 6-12 months of business bank statements

Calculating Income

When it comes to calculating income for a self-employed application, lenders will either take an average of two years’ income or your most recent annual income if it’s lower. That said, every lender has different policies, and there are different things that we can do with different lenders to help our clients get the most out of their situation.

If you’re self-employed and looking to qualify for a mortgage, reach out to us! We can work with you to ensure you have the necessary documentation, strategize about your options and obtain a pre-approval to help you understand how much you qualify for.

Written by the DLC Marketing Team and Horner Mortgages