With close to 20 percent of Canadian income earners being self-employed, you may be wondering whether it is easy or difficult for this growing demographic to acquire a self employed mortgage. If you are planning to get a mortgage and you’re a self-employed Canadian, here are important facts you should know.
1. You can qualify for a self employed mortgage
Most people believe that if they own a business, they cannot get a mortgage unless they pay high-interest rates to private mortgage lenders. This is not always the case. There are many financial institutions, including credit unions that offer affordable mortgages to self-employed people.
2. You must have the right documents
It’s important for self-employed people to compile the necessary documents to strengthen their mortgage applications. In most cases, if you can provide evidence of reliable income, you can qualify for regular mortgage products and rates in Canada. If you cannot prove income, then you must have a strong credit score, credit history, and a minimum down payment of 10 percent. Here are some of the documents you need when applying for a self employed mortgage in Canada.
- Evidence that your GST or HST is paid in full
- Contracts that show the expected revenue and past revenue streams for the past 2 years
- Notices of assessment (from Canada Revenue Agency)
- Business and personal credit scores
- Valid business license
- Sufficient proof of principal business ownership
- Sufficient proof that the down payment hasn’t been gifted
As long as you have the right documents, it is possible to qualify for a self employed mortgage in Canada. Be sure to consult with a licensed mortgage lender who can help avoid potential pitfalls when applying for a mortgage.
3. Default insurance premiums

Generally, mortgage default insurance works the same way for Canadians who are self-employed as it does for everyone else, as long as you can successfully prove income via documented tax Notice of Assessments. In case you’re putting down between 5 percent and 19.99 percent, you must pay a premium. But you don’t need to pay a premium if you plan to put down 20 percent or more.
It is essential to mention that mortgage premiums are usually added to mortgage payments and paid off within the lifespan of your loan or during amortization.
4. You can increase your chance of getting approved for a mortgage
There are essential steps you can take to improve your chances of impressing a potential mortgage lender. If you plan to apply for a self employed mortgage, here are important steps to help you improve your chances of approval.
Good credit score: Whether you are self-employed or not, your lender will check your credit score. So, pay off your credit card debts, accept credit increases, don’t surpass your credit limit, ensure your debts never go to collection, and pay your bills on time. These are some of the ways to improve your credit score.
Save enough cash for a down payment: Having more down payment will make potential lenders see you as less risky. Besides, a big down payment means your lender gives you a low amount of money, resulting in affordable monthly payments.
Pay down your debt: Having less debt will make it easy for you to make a timely and consistent mortgage payment. So, it is a great idea to save as much debt as you can so that you can free up enough cash to repay your mortgage.
Good self-employment history: It is important to keep accurate records of self-employment as this will give you an outstanding self-employment history. It’s recommended to have at least two years of great self-employment history before you can apply for a self employed mortgage in Canada. Be sure to keep an eye on the mortgage rates. If interest rates are low, it is worth applying for a self employed mortgage even when you don’t have two years of self-employment history.
Maintain accurate records: Keep all your business and personal tax records up-to-date and accurate. Improperly kept records could make most lenders reluctant to offer you credit services.
5. If you don’t qualify for a self employed mortgage, there are alternatives
Suppose you don’t qualify for a mortgage from A-lenders such as banks, you still have other options to get a mortgage. Consult with an experienced mortgage broker to access credit services from private mortgage lenders or alternative lenders.
Most self-employed individuals often deduct many of their expenses from their overall income for tax purposes, which is why their income may seem low to A-lenders. Even with significant savings and a good credit score, A-lenders will be wary about advancing credit to an individual with low income.
On the other hand, private mortgage lenders are more concerned with a borrower’s debt-to-income calculations. Adding back the deducted expenses to your net income will make it higher. And in exchange for other fees and higher interest rates, private mortgage lenders may be more likely to lend money to you even if your credit score and income are not high. Just ensure your business and tax records are accurate and up-to-date.
The bottom line is; it is possible to qualify for self employed mortgage in Canada. Consult with an experienced mortgage broker to learn more about getting a mortgage if you are self-employed.