Q & A by Oakville Advisor
Hi Answer-Man
I work very hard. I make good money running my own successful contracting company. I also have good credit history but because I’m an independent i.e. self employed, does this mean I cannot get a mortgage to purchase a home? Is that Right?
Thank you for this question. Wrong!
Many business entrepreneurs like yourself and especially new comers to Canada are facing this exact challenge so let’s take a closer look at your situation.
Over 20% of today’s Canadian income earners are self employed, business for self are 100% commissioned. With this large segment of the population now working for themselves you would think the mortgage banks in Canada would take notice. Well they have, Finally!
Most people in business write off expenses before declaring income. That’s the advantage of being in business for yourself right! You pay income tax on a lesser amount but when you need to prove income for a mortgage approval, your tax returns make it look like your income is low and you can’t afford the mortgage you require or deserve.
Qualifying for a Low Documentation Mortgage (Low Doc or No Doc or Alt Doc) is easier than you think. You can purchase a new property with as little as a 5% down payment or re-finance your existing home up to 90% of its appraised value. The lender bases their mortgage approval on your good credit history instead of your net income.
What is required for a Self Employed Mortgage?
- A clean credit history without slow payments, collections, judgments or bankruptcies
- Proof of self employed status for the last 2 to 3 years through Incorporation papers, GST returns or business registration papers
- The property must be located near a major urban centre
- The last 3 years Notice of Assessment (NOA) and T1 Generals from Canada Revenue Agency and your accountant to prove no taxes owing to Revenue Canada
- If your credit score is low you may be required to provide the last 12 months of bank statements to show regular deposits to prove your ‘stated income’
- For purchase deals proof that your down payments is from your own resources, that is for No Proof of Income deals gifted down payments are not allowed.
It’s going to get tougher for the self employed, new immigrants and higher-risk borrowers to get a mortgage as concerns continue to mount over the state of Canada’s housing market.
Effective February 1 st., CIBC’s wholesale mortgage arm, FirstLine, quietly announced that it will no longer accept new applications from “stated income” home buyers who can’t prove they have the annual net income to qualify for home loans. This may be the first indication that other mortgage lender’s will follow suit. Mortgage applicant’s falling into this category should be prepared to act sooner rather than later or risk paying a higher interest rate.
Everyone’s situation is slightly different of course so it is very important for you to sit down with a dedicated mortgage professional to help you evaluate all your available options. There is no charge for this service and they will shop the entire mortgage market for you to find a suitable mortgage product and at lowest available rate in Canada.
* For more information on self employed mortgage programs please contact our office today (905) 878-5053 or Email: oakvilleadvisor@cogeco.ca.
Tags: mortgage, Self Employed
About the author: Kevin McAmmond
Kevin McAmmond contributes a bi-weekly online business column called "The Oakville Advisor" where he shares real life financial questions and ideas from professional advisors. Kevin has worked in the financial private banking industry for 24 years as a Wealth Advisor with CIBC & ScotiaMcLeod as well as in the real estate industry with Royal LePage in Oakville. Today he combines his knowledge and passion for investments and real estate as a Mortgage Planner for Designer Mortgages. (FSCO Lic.# 10194) On-Line at: www.haltonmortgages.ca * Contact Kevin Directly; (905) 617-4422 or EMail: kevin.mcammond@verico.ca
Follow
Subscribe