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Mortgages for Self-Employed Canadians
Being self-employed can provide freedom, flexibility and income opportunities. It can also make mortgage qualification more complicated. Employees often have relatively straightforward income documentation. Business owners, contractors and incorporated professionals can have income that fluctuates, comes from different sources or is structured for legitimate tax and business reasons. That doesn't mean self-employed Canadians can't qualify for a mortgage.
It means the story behind the numbers becomes especially important.
Why Is Self-Employed Income Different?
A lender needs to determine whether the income being used for qualification is:
- legitimate
- sustainable
- reasonably predictable
- adequately documented
A self-employed person may receive income through salary, dividends, business income or some combination.
Business expenses and tax planning can also mean taxable income doesn't always tell the complete story of the business.
Different lenders and mortgage programs may evaluate this information differently.
Documents You May Need
Depending on the application and lender, documentation could include:
- personal tax returns
- Notices of Assessment
- business financial statements
- corporate tax information
- business bank statements
- articles of incorporation
- business licences
- contracts or invoices
- confirmation of business ownership
- evidence showing how long the business has operated
The exact requirements depend on the circumstances and lender.
Preparation Matters
If you're self-employed and planning to buy or refinance, talking with a mortgage professional early can be particularly useful.
It can allow time to identify documentation issues before there is an accepted purchase agreement and a tight financing deadline.
Don't Make Major Tax Decisions Based Solely on Mortgage Qualification
Paying less tax is naturally appealing. But aggressively reducing reported taxable income can sometimes affect the income available for mortgage qualification. Mortgage planning and tax planning should therefore be considered together, with appropriate professional tax advice.
A mortgage professional isn't your accountant, and an accountant isn't necessarily assessing your finances using a lender's underwriting criteria.
Coordination matters.
Tell the Story Behind the Business
Good underwriting isn't simply uploading tax documents. The lender needs to understand the application.
What does the business do?
How long has it operated?
How does it generate revenue?
Is income growing or declining?
Are there unusual one-time expenses?
Is revenue seasonal?
Clear documentation and clear notes can make a complicated file easier to understand.
At Haystax Mortgage, we believe strong mortgage applications tell a clear and well-supported financial story.
If you're self-employed, start the mortgage conversation before you start shopping for your next home. Find a Haystax Mortgage location here.
We work for you, not the banks, providing access to a wider range of mortgage options.
Banks offer only their mortgage products and rates. Unlike them, Mortgage Brokers have access to a variety of lenders, including banks, credit unions, monoline lenders, private financing, and more.
You're at HOME with Haystax!
Frequently Asked Questions
Can I get a mortgage if I'm self-employed?
Yes. Self-employed Canadians can qualify for mortgages.
The difference is that documenting and verifying income can be more complex than it is for a salaried employee. Lenders may review tax returns, Notices of Assessment, corporate information, financial statements, bank statements or other documents depending on the business and mortgage program.
Different lenders can also have different approaches to evaluating self-employed income.
How do lenders calculate self-employed income?
Lenders may calculate self-employed income using personal taxable income, salary, dividends, business income or other documented sources depending on how the business is structured and the lender's underwriting guidelines.
They will typically want evidence that the income is legitimate, sustainable and reasonably likely to continue.
Because self-employed income can fluctuate from year to year, lenders may look at historical income rather than relying on a single recent pay period.
What documents does a self-employed borrower need?
The documents required depend on the lender, business structure and mortgage program.
Common documents can include:
- personal income tax returns
- Notices of Assessment
- corporate financial statements
- business tax documents
- business bank statements
- articles of incorporation
- business licences
- contracts or invoices
- proof of business ownership
Providing complete documentation early can make the mortgage process significantly easier.
Can dividends be used to qualify for a mortgage?
Potentially. Some lenders may consider dividend income when assessing a self-employed or incorporated borrower's mortgage application.
The lender will generally want to verify the history, source and sustainability of the dividend income and may also review the financial health of the corporation paying it.
Treatment varies by lender, which is one reason mortgage options for incorporated business owners can differ considerably.
How many years of self-employment do lenders require?
Many traditional mortgage programs prefer an established history of self-employment, often supported by approximately two years of income documentation.
However, this is not an absolute rule for every borrower or every lender.
Some mortgage programs may consider applicants with shorter self-employment histories when there is strong supporting evidence such as previous experience in the same industry, contracts, strong credit, sufficient down payment or other factors.
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