Self-Employed Mortgages

Self Employement & Mortgages
The Documentation Required for Self-Employed Mortgages
CMHC Self-Employed Program
FAQ

While being self-employed can come with its own set of challenges, getting a mortgage as a self-employed individual is possible.

In this article, we will go over everything you need to know about self-employed mortgages and how to make the process as smooth as possible.

How do banks view self-employed income?

The exact percentage of self-employed income that banks consider as income can vary, but typically it is around 50-65% of an individual's net income that is taken into account for mortgage qualification purposes. This calculation is used to determine an individual's ability to repay the loan and considers factors such as expenses, taxes, and other debts.

What are self-employed mortgages?

Self-employed mortgages are a type of home loan specifically designed for individuals who are their own boss. These loans take into consideration the unique financial situation of self-employed individuals and offer more flexible options.

Eligibility Criteria for Self-Employed Mortgages

To be eligible for a self-employed mortgage, you must meet certain criteria. These include having a good credit score, being able to provide proof of income, and having a stable job history. Additionally, lenders will typically require at least two years of business financials and tax returns to determine your income and financial stability.

The Documentation Required for Self-Employed Mortgages

When applying for a self-employed mortgage, you will need to provide the following documentation:

Personal tax returns for the last two years
Business tax returns for the last two years
Proof of income such as a Notice of Assessment from the Canada Revenue Agency
Proof of business ownership such as a business registration certificate
A letter from your accountant confirming your business’s financials

CMHC Self-Employed Program

The program offers flexible guidelines for income verification and provides a simplified application process for self-employed borrowers.

The CMHC Self-Employed program is a mortgage loan insurance program offered by the Canadian Mortgage and Housing Corporation (CMHC) for self-employed individuals seeking to purchase or refinance a home.

The program also offers low down payment options and helps ensure that self-employed borrowers have access to mortgages.

Flow Mortgage can help

Don't let traditional banks' narrow-minded lending criteria hold you back. With just six months of income statements for a 12-month period, we can annualize your income by doubling your gross deposits, providing a more accurate picture of your financial situation.

Banks may also examine your net income, but if you've structured your accounts for tax purposes, this may not reflect your true earning potential. That's where we come in. Our experts can use alternative methods to demonstrate your income and help you secure a mortgage.

You don't have to compromise on your dreams of homeownership just because you're self-employed. Our team is dedicated to helping self-employed individuals access tax-efficient and profitable real estate markets.

Home improvement Loan FAQ

1. Can I secure a larger mortgage without increasing my net income?

Yes, by utilizing your gross business income over a 12-month period, including any earnings retained within your company, you may still qualify for a mortgage.

2. What is considered qualifying income for a mortgage?

Banks typically consider line 150 net income over a two-year average as qualifying income. However, we can "gross-up" this figure by 15% or make use of T1 General add-backs to increase the amount considered. If your income is too low or your business has been operational for less than two years, six months of revenue can still qualify you for a mortgage. Dividends, commission earnings, and T$ salary income can also be included.

3. What documentation is needed to prove my income?

Lenders will request the following documentation: T1 General forms and notices of assessment from the last two years, articles of incorporation (if incorporated), HST or business registration (if applicable), and bank statements from the last six months.

4. What if my income is seasonal?

The same income requirements and averages apply regardless of whether your income is earned year-round or seasonally.

The documentation is necessary for lenders to accurately assess your financial situation. To make the process easier, we suggest working with your accountant to gather all the required information. Our online document storage simplifies the process of uploading and sharing these documents.

5. Why is so much documentation required?

The documentation is necessary for lenders to accurately assess your financial situation. To make the process easier, we suggest working with your accountant to gather all the required information. Our online document storage simplifies the process of uploading and sharing these documents.

Mortgage for Self-Employed Individuals:
Everything you Need to Know

Table of contents

How do banks view self-employed income?

What are self-employed mortgages?

Eligibility Criteria for Self-Employed Mortgages

The Documentation Required for Self-Employed Mortgages

CMHC Self-Employed Program

Flow Mortgage can help

Home improvement Loan FAQ

Ready to chat with us?

Mortgage for Self-Employed Individuals: Everything you Need to Know

Table of contents

How do banks view self-employed income?

What are self-employed mortgages?

Eligibility Criteria for Self-Employed Mortgages

The Documentation Required for Self-Employed Mortgages

CMHC Self-Employed Program

Flow Mortgage can help

Home improvement Loan FAQ

Ready to chat with us?

Mortgage for Self-Employed Individuals:
Everything you Need to Know