Self Employed Mortgage

 

 

It is always hard to acquire self employed mortgage in Canada, despite of the country’s high ratio of self-employed population. Even after the approval of their mortgage requests, self employed borrowers are charged with high mortgage rates. There are however certain reasons behind this strictness.

 

Since most of the self employed businesspersons are unable to prove their exact income, lenders usually require third party income validation from them. Moreover, approval of a mortgage highly depends on the profit ratio of a business, whereas many self-employed individuals increase their expenses to reduce net income and tax, eventually.

 

Required Documentation for Self Employed Mortgage

  • Income tax returns and notices of assessment for last 2-3 years
  • Financial statements of business
  • Proof of HST and/or GST, paid in full
  • Contracts supporting projected future revenues
  • Personal and business credit scores
  • Proof that you are a principal owner in the business
  • Documentary evidence proving the business being licensed
  • Proof that the down payment has not been gifted

 

For further details about the documents required by the mortgage bank, see through the library of Resourceful Capital.

 

Role of Mortgage Broker

If you are not an expert in finance, it becomes very hard to evaluate alternative mortgage plans from different lenders and identify the best one. This is where a professional mortgage broker comes in; they have the relevant knowledge and extensive experience in mortgages.

 

CMHC Insurance

Self employed mortgage with a down payment less than 20% certainly requires CMHC insurance, while the annual insurance premium is also determined by the down payment and third party income validation. The insurance rate decreases with the increase in down payment. On the other hand, insurance rate is always high if third party validation is not provided.

 

WITH VALIDATION Down Payment (% of Home Price)
Amortization Period 5% – 9.99% 10% – 14.99% 15% – 19.99% 20% or higher
26-30 years 2.95% 2.20% 1.95% 0.00%
25 years or less 2.75% 2.00% 1.75% 0.00%

 

WITHout VALIDATION Down Payment (% of Home Price)
Amortization Period 5% – 9.99% 10% – 14.99% 15% – 19.99% 20% or higher
26-30 years N/A 4.95% 3.10% 0.00%
25 years or less N/A 4.75% 2.90% 0.00%