Mortgages for Self Employed Canadians | Loan Comparison Platforms for Bad Credit Debtors

November 8, 2021 | Editorial Team

It is becoming increasingly popular in Canada to become self-employed. People choose to start their own businesses for many reasons. This may include gaining more control over your destiny, choosing your own hours and being able to work from home. If you have taken this leap into self-employment, you may be worried about your mortgage and housing options.

In Canada, people who have their own businesses can find it tough to get the right mortgage solutions for their needs. Banks and other lenders are often reluctant to lend money to self-employed individuals. This is because their income can dramatically change each month.

Individuals who work for themselves can also face lengthy periods with little to no work. This means your income is not guaranteed, making it more difficult for you to get a mortgage. However, all is not lost. Your chances of being accepted for mortgage products may be better than you think. This can be especially true if you use the right mortgage broker – here’s our recommendation for the best mortgage deals in Ottawa and Calgary.

If you want to get into the mortgage market, specialist advisors can provide the guidance and advice you are looking for. They can help you to understand mortgage rates, down payment options and the mortgage market. Aim to show that your business is a viable, successful one and that you have quality money management skills. Then you can hopefully bid farewell to the world of renting and get onto the property ladder.

Best Mortgages for the Self-Employed in Canada

Your chances of becoming a homeowner in Canada could improve if you seek advice and better understand your options. Below, we will look at some of the options available to you. When considering which option to choose, you should look for the best mortgage rates, so you are not paying more than necessary.

1. Loans Canada

Loans Canada is a popular mortgage and loan comparison platform. They have helped thousands of Canadians meet their financial ambitions. Loans Canada is part of the largest lender network in Canada.

Loans Canada offers a wealth of educational resources to educate Canadian people. They aim to empower them and help them make the right financial choices. The team can help you find unconventional lenders for your self-employed mortgage.

These lenders may specialize in providing finance to those not in traditional employment. They may also help those with bad credit or no credit history. Potential homeowners only need to submit one mortgage application to find multiple offers of finance.

Loans Canada provides a detailed list of document requirements. They also provide information about the amount of down payment you should make. Clear instructions on how self-employed individuals can improve their chances of being accepted for a mortgage are listed on the website. This includes:

  • Ensuring your credit score is a minimum of 650.
  • Paying a bigger down payment.
  • Reducing any existing debt.
  • Keeping accurate records of your self-employment history, including your earnings.
  • Keeping accurate tax and business records.

Loans Canada also offers tips, guides, and tools to help you build your financial awareness, improve your credit rating, and make better financial decisions. For self-employed individuals who are looking to obtain a mortgage in the future, Loans Canada can help you to be as prepared as possible. They can help you to improve your likelihood of success.

If you are interested in a self-employed mortgage, you can speak to a Loans Canada mortgage specialist. Visit Loans Canada’s website today for more information, or to begin your mortgage journey.

2. Scotiabank Mortgage for Self-Employed

For those who would prefer to take their mortgage with a traditional bank, The Bank of Nova Scotia, more commonly known as Scotiabank, offers a specific mortgage for self-employed individuals. Scotiabank is one of the Big 5 banks in Canada.

Scotiabank offers both variable and fixed interest rates. Fixed-rate terms are available from 6 months – 10 years. Unlike other financial institutions, Scotia does not require the self-employed to make a big down payment. You can qualify for a mortgage with as little as 10% down.

You can also opt for weekly, bi-weekly, semi-monthly, and monthly payment options. This means you can choose the repayment option that best suits your business and finances.

Scotia also offers some great mortgage tools on its website. These include:

  • Affordability Calculator – This calculates the value of the property you can realistically afford.
  • Mortgage Calculator – This determines your payment options, mortgage length, interest rates, and amortization.
  • Mortgage-Free Faster Calculator – This shows you how to become mortgage-free faster.
  • STEP Calculator – This shows how small changes to your finances and mortgage repayments can make a big difference.
  • Mortgage Selector – This helps you to compare mortgage options and choose the best one for you.

You can apply for your Scotiabank self-employed mortgage online, over the phone, or in a Scotia branch.

3. True North Mortgage

True North Mortgage is a mortgage broker that offers unbiased, expert advice completely free. They arrange more mortgages than any other broker in Canada and have the most 5 star reviews in the mortgage industry.

They provide information and advice about the best home lending solution for you at the best possible rates.

True North gives you access to lenders that don’t require third-party validation of your income. You can finance up to 90% of the value of your property with mortgages available for purchases and refinances. They also offer competitive mortgage rates and interest rates.

To qualify for a True North self-employed mortgage, you must meet the following requirements:

  • Good credit score.
  • Minimum of two years Business-For-Self tenure.
  • Reasonable monthly or annual income.
  • A minimum of 5% of your down payment must come from your own finances.
  • No income taxes owed.

True North Mortgage also offers a pre-approval option. This can tell you whether you are likely to be approved for a mortgage and help to protect your credit rating.

They also offer a Compare and Save Calculator with a variety of sliding options. This can help you find the best mortgage at your preferred term size and interest rates.

True North Mortgage has 11 physical locations across Canada. You can also apply for a mortgage through the digital application, online, over the phone or via email. Contact True North today for more information or to apply for a self-employed mortgage.

Alternative Mortgage Options

Canadians seeking self-employed mortgages may also be able to get help via a range of good credit unions. You could look at lesser-known private lenders and other financial institutions. Have you have attempted to get self-employed mortgages to no avail? A mortgage lender can use their knowledge of the market to assist you and make your dream a reality. What’s more, they are often able to offer their services for free.

Thoroughly research mortgage rates, mortgage broker services before making a mortgage application. Also, look at your down-payment options.

How Can a Self-Employed Person Get a Mortgage in Canada?

If you do want a self-employed mortgage and housing solution, lenders may be unwilling to help you. This could be due to insecure, unsteady income that isn’t guaranteed for future years. The fact that banks (see True North) avoid risk is a big reason why so many business owners find it so hard to get on the property ladder. However, some people in self-employment find it easier than others when they need to borrow money for a home.

The steadier your income is, the higher your chances of being accepted. If your earnings have remained at the same level or have grown over several years, you are more likely to be accepted. Having a healthy credit score will also help you. Your lender may also consider other factors, such as any credit cards you own and the value of your home.

You will also need to provide specific documents to prove your identity and fit other legal requirements. Your company will typically need to be registered. You should provide access to official documents like tax returns and financial statements. This will help you when looking for a self-employed mortgage.

Many people wrongly assume that having their own business makes it more challenging to borrow money. This is not always true. If you are not regarded as particularly risky, you have a much better chance of being approved with reasonable mortgage rates. Those who have been working for themselves for many years may also fare better when applying for a mortgage.

What Income Do Mortgage Companies Look at for Self-Employed?

The income level you need for a self-employed mortgage will depend on how much you need to borrow, your down payment, and the property’s price. Lenders look closely at affordability when deciding whether to accept your application. They will look at the money coming into your household, your monthly expenses and the costs linked to owning a property. You may also be required to show any other debts, such as those on credit cards.

They will also consider the costs associated with closing the deal, such as legal fees. A sizeable down payment can make lenders much more confident. You will generally need to show evidence of all your business earnings from the past three years to get a self-employed mortgage. If you only recently started working for yourself, you may be required to wait a while to show that your enterprise is viable.

If your business is particularly successful, you may be able to use your company profits to your advantage. You can use them to convince lenders to accept your self-employment mortgage application. Your accounts must be in order, so consider enlisting the support of a professional accountant. You are also more likely to get mortgage and housing products by hitting specific criteria. For example, if your monthly housing costs are less than 32% of your gross household income each month.

It is also essential to try to keep your overall monthly debt balance below 40%. Try to pay off as much debt as you can. Aim to pay off credit cards, loans and improve your credit history if you need to. Having a good credit score will improve the mortgage rates offered to you. It will also give you greater accessibility to mortgage products.

Can I Use My T4A Income to Buy a House?

It can be particularly difficult, but not impossible, to get self-employed mortgages when you earn T4A income. T4A income is money paid by an employer when they regard you as an independent contractor. T4A forms are records that reflect payments made by someone who isn’t your employer. When a T4A form is completed, copies are sent to you as well as the Canada Revenue Agency (CRA).

Self-employed mortgages come with more complications when T4A is involved. Specialist mortgage brokers may be able to assist you if you do wish to buy a home with T4A income. You could also get advice from Canada Guaranty. These independent companies can look at your finances, down payment options and the mortgage rates available to you. They can then make recommendations about the best self-employed mortgages.

Do Home Loans Look at Gross or Net Income?

Gross earnings are treated differently when you work for yourself. Most mortgage lenders will only consider 80% of your gross revenues when assessing your suitability for owning a home. Canada Mortgage and Housing Corporation (CMHC) rules mean lenders can only use your last three years of income to assess your application.

Some self-employed mortgage lenders will allow you to add some business tax deductions to your income. These can include car expenses and money spent on marketing your business. Certain mortgage lenders will add a flat percentage to cover such costs.

You may have more success if you are purchasing your property with a partner who is employed. Being married to someone who is also self-employed won’t completely rule you out of being accepted for a mortgage. This is why it is important to seek advice from self-employed mortgage specialists. This could include mortgage brokers or independent companies such as Canada Guaranty.

The Bottom Line

Obtaining a mortgage for self-employed individuals can be a confusing and daunting process. You may find that the down payment you are required to pay is higher than expected, and your mortgage rate may differ. You may feel there are limited options for self-employed mortgages. However, if you enlist the help of a mortgage broker or Canada Guaranty, it can be easier to obtain your goal.

Self-employed mortgages are not out of reach for people who own their own businesses. With some research and advice, you could soon find yourself as a proud homeowner.