Getting a Mortgage when You're Self-Employed
Updated: Jun 23
More and more I've been getting asked questions about what the options are when it comes to getting approved for a mortgage when your main source of income is from self-employment.
Typical Self-Employment Situations:
Contractor or Freelancer
Limited Company where you are a payroll Employee
Business Owners declare their income differently than the average person applying for a mortgage and because of that you will have different needs in a mortgage lender than someone who is not self-employed.
In most cases the bank wants to use your T4 income over a 2 year average. As most business owners pay themselves a modest income in order to avoid a large income tax bill, this becomes a hindrance.
A Broker has a broad knowledge of the mortgage market and we use lenders that will look beyond what you personally pay yourself and actually use your business income to help you qualify for a mortgage.
Having a larger downpayment as someone who's self-employed will provide you more mortgage flexibility. So it's never too early to start strategically planning the structure of how you pay yourself and save from your business. If you start well ahead of time with mortgage approval in mind will help you through the approval process when it's time.
You may even be able to use the cash from your business account as the down payment.
Things to consider preparing before application:
Work on having a Good Credit score
2 years of proof of business income and financial Statements (income taxes, notice of assessment, etc. )
Proof that no income taxes or GST/HST are owing
Proof of stable income and any contracts to prove income for upcoming years
Proof of ownership of the business