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Getting a Self-Employed Mortgage
Banks Have Strict Rules For Self Employed Mortgages
Despite the growing numbers of self-employed Canadians, the self-employed find it more difficult to obtain a mortgage than those who work for a salary. Traditional lenders make it very difficult for the self-employed to get a mortgage as they consider them a higher risk. More than 20% of Canadians are self-employed.
You may be wondering what your chances are of successfully getting a mortgage if you’re self-employed. Despite the fact that there is a significant amount of self-employed people with a stable income they still encounter difficulties when seeking out a mortgage. Self-employed individuals are faced with more strict rules and treated based on the type and amount of their income. Banks and other private lenders want to feel confident that they will get their money back when dealing with someone who is self-employed.
We Make Mortgage Possible For Self Employed
They have less ways of authenticating the stability of the income so as a result they create more strict rules to protect themselves. With Toronto Mortgage Brokerage there will be no issues because we are not biased towards self-employed individuals! Due our expertise and knowledge in the field, we can easily assess your situation and make it possible for you to obtain a mortgage even if you cannot prove the consistency of your income in a conventional way.
Proof of Income is Required
Most lenders will require your Personal Income Tax assessments for the last two to three years before they will even consider giving you a loan. If you are able to produce these, you can negotiate the same terms as those in regular employment. The debt to income ratios, down payment and credit requirements of the self-employed in these instances, are treated in exactly the same way as the employed.
In addition to the tax assessments, traditional Toronto banks will require a number of other business documents. These will include business financial statements, your credit score, financial planning and proof of business ownership amongst others.
If you are self-employed Certified Mortgage Brokers Toronto can team you with the lender that offers the best rates for the self-employed. We have a list of established investors with whom we partner.
Tax-Deductible Expenses Reduce Net Income
Although many banks don’t recognize it we know that your tax assessment probably does not correctly reflect your income. Most savvy businessmen will fully utilize their allowable tax-deductible expenses. In this way, net income is reduced meaning that you qualify for a lower mortgage or you may not qualify at all.
The lower declared income will also have a negative effect on the debt to income ratio which represents the percentage of income that you use to service your debts. Some private lenders may allow certain expenses to be written back when calculating the debt to income ratio.
Because of your lower net income, your Toronto mortgage broker may suggest that you use mortgage products that allow “stated income”. You are likely to pay more interest, but declaring higher income and then paying additional tax, will probably cost you more.
Stated income is calculated as income that you could reasonably expect to earn in a business of your size in your industry.
Planning Ahead Could Help You to Negotiate the Best Rates for Your Toronto Home
If you know that you will be seeking finance in the future you could plan ahead and ensure that you receive the best rates available
- Look after your credit score and that of your business
- Reduce the amount of debt that you have as this will improve your debt to income ratio
- Work out whether it is in your interest to reduce claimed expenses and increase your taxable income
- Make sure that all your paperwork is up to date and available
- Be prepared to make a bigger down payment. This lowers the risk to the lender and the interest rate
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Our Experts Will Guide You!
Speak to one of our qualified mortgage experts that will guide you in the right direction. Usually as a self-employed person when you go to the bank to obtain a mortgage, you have to go out of your way and take extensive measures by: improving your credit score, offering a huge down payment, showing history of work, savings accounts and providing many other documents. These steps all make sense and are in some way part of the procedure when you want to improve your chances of getting a loan, but we make it much faster and simpler than any bank out there.
At Toronto Mortgage Brokerage we will personalize your mortgage, whether it is for refinancing, buying or transferring to achieve the best results possible.
You have worked hard to achieve success in your field of work so you should be entitled to a great mortgage as well! We appreciate the value of hard work so please contact us to book a free consultation.