What is a self-employed mortgage?
A self-employed mortgage is a non-conventional type of mortgage available solely to those with full- or part-time businesses, such as sole proprietorships, corporations, and partnerships, and who are ineligible for standard mortgages. To qualify, people must have run their businesses for at least two years.
Mortgages for the self-employed are designed specifically for borrowers who generate their income from their own business or self-employment rather than from a salaried job. The main difference between self-employed and employed people is that self-employed people usually have an irregular income, while employed people get a paycheck every two weeks or every month.
A Lenders, B Lenders, and private mortgage lenders all offer these types of mortgages to borrowers.
Different lenders have different requirements for getting a mortgage, but most of them want proof of stable income, which can be hard for self-employed individuals to produce.
In order to qualify for a self-employed mortgage, borrowers must often pay mortgage insurance.
Who is a self-employed mortgage for?
Aspiring homeowners who manage partnerships, businesses, and sole proprietorships on a full- or part-time basis.
Self-employed people who are incorporated must own the corporation and receive a salary or dividend from it in order to be considered self-employed.
How does a self-employed mortgage work?
You must have worked in the same position or run your business for a minimum of two years in order to be eligible for a self-employed mortgage.
Because self-employed home loans are riskier, applicants must submit more documents than in a regular application. You may be required to submit the following documentation with your application for a self-employed mortgage:
- Financial records that show the revenue from your business
- A Notice of Assessment from the past 2-3 years
- Your credit history and score
- Evidence that you have filed and paid your personal income taxes
- Contracts that outline the anticipated revenue for the upcoming years
- Proof that you are the business owner
- A copy of your business registration, the GST license, or the articles of incorporation that attest you have a license
- Evidence that your down payment was not a gift (optional)
What are the advantages?
A self-employed mortgage can help you save money on taxes.
You may benefit from saving thousands of dollars a year in taxes as a self-employed person.
Quick and easy approvals with a self-employed mortgage
A stated income mortgage can be approved for fairly rapidly, often in only one working day
You can possibly be approved for a larger loan amount.
As opposed to a traditional national banking institution, which frequently will only take into account your declared net income after deductions, a lender that accepts stated income mortgage applications from self-employed borrowers and home buyers can help you qualify for a much higher mortgage amount.
With a self-employed mortgage, you may receive the best and lowest rates
For many Canadians, owning a home is essential to achieving financial success.
It’s a wise investment
For many Canadians, owning a home is essential to achieving financial success.
There may be excellent interest rates available
You can receive a mortgage with a low interest rate from a reputable A Lender if you meet their requirements.
Stability
If you’re running a business or raising a family, or both, knowing that you own your own house can be very significant for your sense of wellbeing.
Can give your business a boost
Having the ability to set up a separate office, store supplies and machinery, and use your home’s equity to fund your company’s growth are all advantages of being a homeowner.
What are the disadvantages?
It’s possible that you won’t get approved at a conventional bank
Some conventional banks and mortgage companies now accept stated income applications from self-employed homebuyers and borrowers. However, the majority of these programs may still be too little to allow you to get the mortgage amount you require.
Higher than conventional mortgage rates
As lenders prefer to take on less risk, and these lenders may perceive greater risk when issuing a mortgage to a self-employed individual, mortgage rates tend to be higher than the lowest rates offered by monoline lenders and Canadian banks.
Large down payment required
This could cost you thousands of dollars.
Less cash on hand
If you put your money into a house, you can’t use it for other things, like your business.
Reduced mobility
Tenants can choose to move when they choose. Owning a property can be a disadvantage if your line of work requires you to be mobile across large geographic areas.
Rates may be very expensive
If you don’t qualify for the A lenders or if interest rates go up, you could end up paying much more than you expected.
What do I need to get started?
If you’d like to explore this option further:
Step 1: Prepare the documentation listed above
Step 2: Start thinking about setting specific, measurable, and quantifiable targets – your goal, your budget, and your timelines
Step 3: Contact us so we can initiate the process!
