Many Canadians are self-employed, realtors, general contractors and builders just to name a few. In fact, around 20% of Canadians are self-employed. The job titles may vary considerably, but one thing that they all have in common is that when it comes to getting a mortgage, they all need to prove their income.
How can I prove my income?
Typically when proving your income for your mortgage, salaried employees will need to show the following; their T4, a letter of employment and their most recent paystubs. For someone who is self-employed; this can be a little more complicated.
Firstly, you will need to have been self-employed for at least two years to ensure the best rates. Banks want to see stability, in your job and in your income. The less of a risk you are perceived as the better mortgage deal you will qualify for.
Someone who is self-employed typically needs matching notices of assessment from the CRA, T1 general tax forms, as well as the financial statements for their business. The bank generally asks questions such as what does the business do? Do they have any employees? How long has the business been operating? You may also need to show any client contracts that you have as well as proof that your taxes have been paid in full. If your business is incorporated you will also need to show articles of incorporation.
This may seem like a long list of paperwork but don’t worry; often we can get much of this paperwork directly from your accountant and we only ask for what is necessary!
Which lenders can I use?
Some lenders, including the big six banks, have specific mortgage programs for self-employed clients. These programs can help you to qualify for a higher purchase price or enable you to have a smaller down payment.
For self-employed clients, it is important to remember that a traditional mortgage might not be your best option. We have had clients for which paying a higher rate has actually saved them money over the lifetime of their mortgage rather than opting for the lowest possible rate. Similarly, for some, a “B” lender might actually offer a better deal than your traditional bank.
Each case is different; we would be more than happy to go through your application and run some numbers on your behalf. We have access to over 40 lenders and can shop the market for you to get the best possible deal.