Approximately 20% of Canadians are self-employed, making this a significant segment in the mortgage and financing space. If you’re self-employed and looking to get a mortgage, there are some key considerations, as the process may differ from a standard mortgage application.

Qualifying for a Mortgage

To obtain a mortgage as a self-employed individual, most lenders require personal tax Notices of Assessment and respective T1 generals for the previous two years to be included with the mortgage application. If you can provide this proof of income and have acceptable income levels, you’ll likely face little issue securing a mortgage product and rates available to traditional borrowers.

Self-Employed Categories

  • If you’re unable to provide Revenue Canada documents, you’ll need a 20% down payment and might face higher interest rates.
  • If you can provide tax documents but have insufficient stated income due to write-offs, a minimum 10% down payment may be required.
  • Putting down less than 20% with stated income will result in higher default insurance premiums.
  • If you can provide tax documents and have a sufficiently high income, there are no restrictions.

Documentation Requirements

In addition to standard documentation, self-employed individuals must provide the following:

  • Two years of accountant-prepared financial statements (Income Statement and Balance Sheet) for incorporated businesses.
  • Two most recent years of Personal NOAs (Notice of Assessments) and tax returns.
  • Potentially 6-12 months of business bank statements.
  • Confirmation that HST/Source Deductions are current.

Calculating Income

Lenders calculate income for a self-employed application by either averaging two years’ income or using your most recent annual income if it’s lower.

If you’re self-employed and seeking a mortgage, or if you already have one, reach out today! I can help ensure you have the necessary documentation, discuss your options, and obtain a pre-approval to determine how much you qualify for.

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