As of March 2024, approximately 13% of Canada’s employed workforce are self-employed (source). Being self-employed
provides many perks including being your own boss. However, qualifying for a mortgage becomes more challenging.
What is a Self-Employed Mortgage?
A self-employed mortgage is a mortgage tailored specifically to fit the needs of individuals who earn non-traditional income. An example of this can be an individual who owns majority shares in a corporation and pays themselves via dividends. The primary difference between traditional and non-traditional income is that traditional income is consistent, while non-traditional income isn’t.
Self-employed individuals will fall into two categories:
Sole Proprietor
Incorporation (minimum 25% ownership)
How to Qualify
for a Self-Employed Mortgage?
There are two different categories for self-employed income verification:
Verifiable Income
Verifiable income for sole proprietors typically requires the most recent 2 years of T1 General and Notice of Assessment (NOA).
Verifiable income for incorporated individuals requires at minimum the most recent 2 years of T4s, T5s, and accountant prepared business financials.
Verifiable income can also include reasonable “gross-ups” from tax filings and accountant prepared business financials.
This approach does not work for most self-employed individuals who enjoy the perks of tax deductions.
Non-Verifiable Income
Non verifiable income for sole proprietors requires at minimum 6 months of business bank statements alongside 3 recent invoices.
Non verifiable income for incorporations requires at minimum 6 months of business bank statements alongside 3 recent invoices OR most recent year accountant prepared business financials.
A minimum 1-year self-employment tenure is required.
This approach is also known as “stated income.” Most self-employed individuals who utilize their tax benefits to its full potential will fall in this category.
Case Studies
Example 1
This client was a sole proprietor and needed to urgently qualify for a sizable mortgage. Their “real” income was much higher than the income claimed on their taxes since they had many tax deductions. Their bank denied them due to not having enough verifiable income to qualify. We took this client’s most recent 6-month business bank statements + 3 recent invoices and was able to get them qualified for their mortgage, allowing them to close on time. Problem Solved!
Example 2
This client recent transitioned out of a 9-5 and opened their own restaurant under an incorporation with 100% ownership. Their first year went well and were looking to refinance their current owner occupied property for additional tax-free funds to invest into their business. Although we didn’t have a 2-year history, we got this client qualified by using the stated income approach with 1-year self-employment tenure. Problem Solved!
Example 3
We had an online inquiry from a self-employed individual who owns 100% of their incorporation. This individual pays themselves a small T4 salary from their incorporation. Their credit union didn’t approve their initial mortgage refinance. They got approved with another mortgage broker with a B lender using the stated income approach. We took a look at this borrower’s tax documents and accountant prepared business financials and creatively grossed-up their verifiable income. We were able to place this individual with a major bank, saving them thousands in interest and fees. Problem Solved!
Your mortgage matters more than
you might think.
Hi, I’m Gurnik Singh, your mortgage consultant. I understand the stress of finding the right mortgage. It sometimes feels like you’re looking for a needle in a haystack.
Wanting to help homeowners navigate these complexities is what ultimately led me to a career in Real Estate Finance. My passion for understanding each person’s unique needs and tailoring the perfect mortgage to fit their life is what drives me. We offer more than just a mortgage; we provide the necessary tools and knowledge to ensure you supported throughout the financial life of your mortgage.
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Don't Just Take my Word For It
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“Gurnik’s services exceeded all expectations. He seamlessly guided me through the intricacies of a mortgage offering invaluable expertise and recommendations.”
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“I worked with Gurnik and he did a fantastic job. He was diligent and responsive which was needed for all my questions as a first time home buyer. Would recommend and thank you again!”
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Step 1
Schedule a Call
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Step 2
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Step 3
Close
Our relationship doesn’t end once you sign on the dotted. We’re here to support you for the lifetime of your mortgage.
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