With nearly 20% of all income earners in Canada being self-employed (at least part-time), we often wonder why it is so difficult for this growing demographic to obtain a mortgage. The first issue is the fact that income is not always easy to prove. Also, many business owners are motivated to expense as much as possible in order to minimize their taxes payable, which is something many lenders do not recognize.
What to Expect
Mortgage default insurance rates for a self-employed mortgage
Mortgage default insurance rates for self-employed mortgages with proof of income
Mortgage default insurance rates for self-employed mortgages without proof of income
Using a Mortgage Broker
What is a Self Employed Mortgage?
In order to obtain a self-employed mortgage, most lenders require that personal tax Notices of Assessment from the past 2-3 years be included with the mortgage application. Those who are able to provide this proof of income can generally access the same mortgage products and rates as traditional borrowers, while those who cannot must at least have a good credit history and provide a minimum down payment of 10%.
In addition to your Notices of Assessment, some of the other supporting documentation a lender may require for a self-employed mortgage application include:
- Financial statements for your business.
- Proof that your HST and/or GST is paid in full.
- Contracts showing expected revenue for the coming years.
- Your personal and business credit scores.
- Proof that you are a principal owner in the business.
- A copy of your borrower’s business or GST licence or Article of Incorporation showing you are licensed.
- Proof that your down payment has not been gifted.
Pre-Approval
Start by finding out your approval amount with us, including incentives and programs available for you.
House Hunting
The search for the perfect home begins with the right realtor that can work with your best interest in mind.
Funding
We co-ordinate with the bank and lawyer to get your mortgage funds issue in order to buy the home!
Closing
Your Lawyer works with sellers, lawyers, banks & many others to legally finalize your purchase.
Vital Information to Know
Mortgage default insurance rates for a self-employed mortgage
If you can prove your income through your personal tax Notices of Assessment, mortgage default insurance works exactly the same for a self-employed mortgage as it does for a traditional mortgage: you have to pay a premium if you are only putting down between 5 and 19.99%, and you don’t have to pay it once you can put down 20% or more. The premium is then added to your mortgage and paid off over the life of your loan.
Mortgage default insurance rates for self-employed mortgages without proof of income
If you cannot provide sufficient proof of income, you must put down at least 10%, and you will have to find a lender who uses Genworth or Canada Guaranty. Only those two providers3 offer mortgage default insurance for stated income files, at the following rates:
Down Payment (% of Home Price): 5%-9.99%
Insurance premium percentage: N/A
Down Payment (% of Home Price): 10%-14.99%
Insurance premium percentage: 5.45%
Down Payment (% of Home Price): 15%-19.99%
Insurance premium percentage: 3.35%
Down Payment (% of Home Price): 20% or higher
Insurance premium percentage: 1.90%
Mortgage default insurance rates for self-employed mortgages with proof of income
If you can provide sufficient proof of income, including your Notices of Assesesment, all three mortgage default insurance providers (Canada Mortgage and Housing Corporation (CMHC), Genworth Canada or Canada Guaranty) offer the following rates:
Down Payment (% of Home Price): 5%-9.99%
Insurance premium percentage: 4.00%
Down Payment (% of Home Price): 10%-14.99%
Insurance premium percentage: 3.10%
Down Payment (% of Home Price): 15%-19.99%
Insurance premium percentage: 2.80%
Down Payment (% of Home Price): 20% or higher
Insurance premium percentage: 0.00%
Using a Mortgage Broker
Because it is difficult to navigate which lenders specialize in self-employed mortgages, or have more favourable terms for the self-employed, this is one case where using a mortgage broker has obvious advantages. Mortgage brokers have access to multiple lenders and have a broad knowledge of the mortgage market. Therefore, a broker can connect you to the lender most suited to your situation.
Hey there! Are you Self Employed?
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