There are many great benefits to being self-employed. Who wouldn’t want to create their own destiny with the work they love? You are responsible and report to yourself, you make your own schedule, and what about those tax write-offs?
Today there are 1.5 million Canadians that are self-employed – as Mortgage Agents and Brokers we too are considered self-employed running and managing our own businesses. We know first-hand this can pose a unique challenge when it comes to financing your mortgage.
There are many different mortgage options available for a self-employed borrower through several different types of lenders.
Traditional Lending Options
Through traditional financial institutions, self-employed applicants can “income qualify” using a two-year average of their annual net income (after taxes based on line 150 of Notice of Assessment) and qualify for a regular standard mortgages. Often this income can be grossed up 15% or reasonable add backs applied from some of your tax write-offs to slightly adjust the income.
But what if you haven’t been self-employed for two years? Or what if you had big start-up costs or wrote off a lot of your income so it looks like you made less than you did? What if there is some cash components to your industry? Or what if your credit has taken some bumps and bruises along the way?
Alternative Lending Options
There are Alternative Lending options for qualifying for a mortgage that we can consider when you are self-employed. Lenders that will take into consideration your gross income, history in the same industry, cash components that are common to an industry, and even 12-month bank statements proving sufficient cash flow.
What information and documentation do you need to apply for a mortgage if you are self-employed?
Be prepared to answer the following information regarding your business:
- Industry Type or Profession – What exactly do you do for a living?
- Business Type – Are you a Sole Proprietor, do you have a partnership, or are you the owner of an incorporated company? What is the interest/ownership percentage (i.e. sole proprietor, partnership – 50% owner, incorporated 35% owner)
- Stated annual gross business revenue – Total money generated by business activities (sales of products/services, fees, etc.) prior to any deductions for costs of goods sold/business expenses
- Notice Of Assessment Line 150 amount for the past two years
And start to gather the following documentation that relate to your business type:
- Two years Notice Of Assessments
- Business License
- Two years T1 Generals with statement of business activities
- Or two years audited or prepared financial statements
- Articles of incorporation
Whether you are just starting to consider your mortgage options or have been declined by your bank, gather your information and contact The Mortgage Advisors to schedule an appointment. With access to over 30 lenders our mortgage agents in Ottawa and the surrounding area can help find the right mortgage for you!