Self Employed Mortgage
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Self Employment is on the Rise
According to statistics Canada 15.5% of the population was self-employed in 2017. Emergent Research estimates that this will rise to 45% by 2020.
Clearly, citizens of Canada are able to make a viable living by working from home. The problem often lies in buying that home since it can be very difficult to qualify for a mortgage to purchase that dream house in Mississauga when you don’t have a verifiable income flow.
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2.9%(prime - 1.05%)
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Proof of Annual Income
To qualify for a mortgage, self-employed individuals must supply the banking institution with their last two tax assessments. The problem is that the tax assessments of the self employed do not accurately reflect income. There are many allowable tax deductions which will significantly reduce the declared income. Telephones, rental and interest spring to mind. Any good accountant will make sure that the income statement reflects the lowest possible income to save on personal income tax.
Self-employed people often have variable income flows, so it is important that you don’t commit to repayments that you are not able to keep up throughout the year. It is therefore essential that you figure out exactly how much you can afford to pay even in the low-income months.
Planning Ahead for that dream house in Mississauga
If you are able to prove your income and you qualify for the amount that you have requested, your mortgage will be treated like any other income earner’s. If you do not qualify you have two alternatives, obtain a loan from a private mortgage lender or plan ahead to ensure that you qualify in the future.
Listed below some suggestions for improving your chances of obtaining the mortgage that you require:
- For the next two years reduce the number of expenses that you claim, increasing your annual income. Although you will pay higher personal tax you will also qualify for a larger mortgage.
- Employ a certified accountant to do your books. Discuss your future plans with him and he will give you professional advice on how to ensure that you achieve your goals.
- Where possible pay outstanding debts and reduce your debt to income ratio.
- Make sure that your credit score is exemplary. A good credit score is important for everyone seeking a loan, but for the self-employed it is essential.
- This is not a good time to take a long holiday as you want to maximise your income.
- Find out if there is a “stated” income option available.
- Find a professional mortgage broker who will have a list of private and institutional bankers that could help you. He will ensure that you are matched up with the organisation that best suits your needs and will tailor a personalised package just for you. He will also ensure that you go prepared with all the required documentation.
Don’t give up on your dream house in Mississauga just because you enjoy the freedom of self-employment. Get in touch with a Certified Mortgage Broker in Mississauga and start planning for the future.
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