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Mortgage for Self-Employed

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TermTypeRate
1 YearFixed Closed6.59%
2 YearFixed Closed5.94%
3 YearFixed Closed4.99%
4 YearFixed Closed5.14%
5 YearFixed Closed4.94%
Secured Line of CreditOpenPrime + .50%
5 Year (Prime 7.20% less 1.10%) VariableClosed6.10%

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Did you know there were about 2.6 million self-employed Canadians as of February 2020? If you’re part of the statistics, you are already aware of the numerous benefits that being your own boss offers. Unfortunately, self-employment also comes with its fair share of disadvantages. For example, it may be more difficult for self-employed people to secure a mortgage compared to salaried workers.

However, “difficult” doesn’t mean “impossible.” With proper guidance, you can get a mortgage in Canada without stress. If you’re eager to learn how, you’ve come to the right place. Here, you’ll learn all you need to know about getting a mortgage as a self-employed borrower.

Let’s get started.

What Is A Self-Employed Mortgage?

As the term implies, a self-employed mortgage is for borrowers who run their own businesses. Self-employed individuals (sole-proprietors, partners, and corporation owners) don’t survive on fixed employment income like workers in third-party organizations. So, they must make do with whatever they get from their business’s profit.

Unfortunately, this means that their net income can be unpredictable and fall short of the requirements for traditional mortgages. Self-employed mortgages take account of such income fluctuations to provide a flexible payment structure for lenders.

There are different self-employed mortgage options you may explore; they include:

How Do I Qualify for a Self-Employed Mortgage in Canada?

To qualify for a mortgage as a self-employed person in Canada, you must meet these requirements:
  • Verified Income

    Income verification is a vital part of every self-employed mortgage process. This typically entails traditional income verification through tax returns or nontraditional income confirmation via financial and bank statements. Some mortgage types will allow you to state your income if they can't verify it through the above means.

  • Mortgage Loan Amount

    A mortgage loan amount refers to the principal mortgage loan balance for purchasing the property. The requirement for mortgage loan amounts in Canada differs by the lender or financial institution.

  • Minimum Down Payment

    The minimum down payment refers to the amount you must provide before purchasing the property. Of course, this sum will vary depending on the type of self-employed mortgage you choose. "A" lenders (Canada's largest banks) may require 5% minimum down payments with default insurance and up to 30% without default insurance. However, for stated income, the rates will be significantly higher.

  • CMHC Self-Employed Mortgage Insurance

    Under Canada Mortgage and Housing Corporation's self-employed program, the requirements are the same for self-employed and traditional borrowers. You can access this program once you can verify your income. Note that CMHC disapproves of stated income mortgages.The requirement for CMHC self-employed mortgage insurance includes GST returns, business license, financial statements, credit reports, a notice of assessment, etc. You must have also been in business for at least two years to qualify.

Are There Any Advantages of Getting Self-Employed Mortgages?

As a self-employed person, you’re less likely to get a mortgage from Canada’s major banks than salaried workers. In some cases, some of you may pay higher rates than traditional mortgages depending on the individual situation, no one has the same numbers. The mortgage broker will explain everything as there are various factors including needing an approval from the Insurer. If not, there are many other self employed mortgage products available through the broker. But understand the number one goal for your mortgage broker is to get you approved with the banks with the best rates/conditions possible for your individual situation, that is the law. Thankfully, there also benefits to enjoy in self-employed mortgages, they include:

Should I Speak with an Experienced Mortgage Broker?

One of the fool-proof ways to qualify for a self-employed mortgage without stress is through a trusted mortgage broker. They are professionals with all the best knowledge of self-employed mortgages.  So they’re the perfect people to turn to for mortgage advice and guidance.

Your mortgage broker will start by evaluating your needs and drawing up strategies and documentation that suit you best. With a competent mortgage agent, you’ll have access to numerous products from various lenders. This means that you won’t run out of options and have a better chance of finding the perfect one. You’ll also avoid handling all the complicated paperwork alone that sometimes comes with self employed mortgages.

The Bottom Line

Getting a mortgage as a self-employed Canadian comes with unique sets of challenges. However, you shouldn’t let the pitfalls get in your way of becoming a proud property owner. With a trusted mortgage broker’s help, you can get the best deals hassle free and make well informed decisions whether you purchase, refinance, or transfer your mortgage.

So, why not make that life-changing call to your mortgage broker this minute? You’ll be glad you did.

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