Small and medium-sized businesses are the engine of the Canadian Economy.
When it comes to mortgages, it hasn’t always paid to be self-employed – because reducing your taxable income can make it difficult to qualify for the mortgage you deserve. We understand business owners because we’re business owners as well!
The banks are bound to use your line 150 income from your tax return based on a 2-year average. If you are a sole proprietor, this income can be grossed up by 15%, but if incorporated we cannot gross up the income. Many times, this income is not sufficient to borrow due to the write-offs.
What’s our better option?
We have a long list of institutional and private lenders that offer excellent mortgage options for self-employed Canadians.
These lenders understand that self-employed individuals have tax write-offs creating significant reductions in their declared income. With these mortgage lenders, you will not be required to prove your income and a reasonable estimate of your annual income will be acceptable.
Here are some requirements to do stated income on your next purchase:
Minimum 2 years of self-employment (we have options for less)
Good credit, there is minimum requirements
Line of work and reasonably income for that industry
Proof of business with articles or business license
Minimum of 10% down (5% of this can be gifted)
Maximum 2 units where 1 unit must be owner occupied
New construction that has New Home Warranty, or a resale property
Maximum property value must be below a million dollars
Maximum mortgage between $600K and $750K
Maximum amortization is 25 years
Insurance premiums are charged for mortgage over 65% of house value (2.6% up to 75%LTV, 3.3% up to 80% LTV, 3.75% up to 85% LTV, and 5.85% up to 90% LTV)
No previous bankruptcy -no defaults on mortgages for past 7 years
No mortgage, credit delinquencies in last 12 months
Commission income earners are not eligible
If you are not eligible for the stated income product as you don’t comply with these conditions or you are refinancing your home, you will have to use an alternative lender that offers products specific to self-employed individuals. In this case, we ask for 6-12 months of business bank statements to confirm business income from your cash flow.
We will offer a solution to show this gross income to qualify and get you a mortgage at slightly higher rates than the stated income insurer products. The difference with this alternative lender is they offer extended amortizations and the payments are sometimes lower than a stated income mortgage, but these lenders generally charge a lender fee of 1% to waive or state the income.
If we cannot base it on your tax returns, then we can explore the stated income and alternative lending solutions with you. It is best to explore all of this upfront before buying or selling to determine your budget and the costs associated with financing.
It is comforting to know that there are solutions to allow a business owners to be able to access financing regardless of the income they declare.
