Self-Employed Mortgage in London, Ontario

Most lenders ask for your last two years of T1 General tax returns and the matching Notices of Assessment (NOAs) from the Canada Revenue Agency, showing no balance owing. You'll usually also need proof the business exists, such as a Master Business Licence or business registration, and sometimes business bank statements. Add the usual items: government ID, proof of down payment with a 90-day history, and details of any debts. If you're GST/HST registered, lenders may want to see that your filings are current. Having everything organised before you apply makes the approval process smoother.

Two years is the common benchmark for prime lenders, because it shows a track record of income. Lenders usually average your net income from the last two T1 General returns, supported by your Notices of Assessment. If your income dropped in the most recent year, some lenders may use the lower figure instead of the average. Shorter histories aren't automatically a no, but they generally narrow your options or require a larger down payment, subject to qualification.

It may be possible. Some lenders will consider a shorter self-employment history if you worked in the same field as an employee before going out on your own, for example a tradesperson who started their own company doing the same work. Others may accept one year of returns with a larger down payment. Alternative lenders can be more flexible, usually with a higher rate and fees. Each file is assessed individually and is subject to qualification.

Not always. Many small sole proprietors earning under the small-supplier threshold aren't required to register for GST/HST, and lenders can still work with their T1 General returns and NOAs. That said, a business number, a registration document or a GST/HST account helps show the business is real and established, and some programs ask for it. If you are registered, lenders may check that your GST/HST filings and payments are up to date.

Lenders generally qualify you on your net income after expenses, so the write-offs that lower your taxes also lower the income a lender can use. Some lenders will add back certain non-cash expenses, such as capital cost allowance, or a portion of business-use-of-home costs. Others may gross up some types of self-employed income. How much is added back varies by lender, so the same tax return can support different borrowing amounts depending on where the file goes.

Most lenders look at your annual income rather than month to month, so seasonal work is usually fine if your yearly totals are consistent. They typically average the last two years of net income from your T1 Generals. If your most recent year is lower, many lenders will use that lower year instead of the average. A clear explanation of the swings, such as a large one-time contract or a slow season, can help the underwriter understand the file.

It depends, and it's worth timing carefully. Incorporating changes how your income shows up: instead of business income on your T1 General, you may pay yourself a salary or dividends, and some lenders will want corporate financial statements as well. A new corporation without a track record can make qualifying harder in the short term. Talk to your accountant about the tax side and to your mortgage agent about timing before you make the change, especially if you plan to buy soon.

A business-for-self or stated-income program lets some lenders consider a reasonable income for your type of work, rather than only the net income on your tax return. It's generally used when write-offs make your taxable income low, but your business is established and your credit is solid. These programs usually require a larger down payment, and may come with a higher rate. Lenders still check that the stated income is reasonable for your industry. Approval is subject to qualification.

If you can qualify using your verified income from tax returns and NOAs, the minimum down payment is generally the same as for anyone else: 5% of the first $500,000, 10% of the portion from $500,000 to $1,499,999, and 20% for purchases of $1.5 million or more (default insurance is not available at $1.5 million or more), with mortgage default insurance from CMHC, Sagen or Canada Guaranty below 20%. Stated-income or alternative programs usually require a larger down payment, often 10% to 20% or more, depending on the lender.

Rate holds on a pre-approval commonly last 90 to 120 days, depending on the lender, the same as for salaried borrowers. For self-employed applicants, it's especially important that the pre-approval has had your documents reviewed, such as your T1 Generals and NOAs, rather than just a quick estimate. If a new tax year is filed during your search, your numbers may change, so it's worth checking in before you make an offer.

It's best to avoid changing your employment while you're buying, if you can. Lenders approve your file based on your income at the time of approval, and they may re-verify employment before closing. Leaving a salaried job to go self-employed during that window can put the approval at risk, because there's no self-employment history yet. If a change is coming, tell your mortgage agent early so the timing of the purchase and the switch can be planned.

Yes. Self-employed homeowners can generally refinance up to 80% of their home's appraised value, or set up a HELOC up to 65% of the value within that 80% total, subject to qualification. Lenders use the same income review as for a purchase, typically two years of T1 Generals and NOAs. If your income is hard to document, some alternative lenders may consider equity-based options, usually at a higher cost. Breaking a mortgage early to refinance can trigger a penalty.