If you are self-employed and need a mortgage to buy or refinance a home, talking to your bank may provide challenges. I work with people all the time who are self-employed and have been turned down by their bank for financing. In some cases they simply can’t do what they want but in other cases they have options. Understanding those options and developing a plan can help those who are self-employed and need a mortgage to buy or refinance their home.
The first step is having an open discussion with your mortgage broker.
What is your business?
How long have you been in business?
How long have you been in the same industry?
How much do you earn and claim on taxes?
Do you claim any business expenses such as auto, your home, etc?
With a review of your tax return for the past 2 years, your mortgage broker can consider options through a variety of lending products for self-employed people.
If you are self-employed and need a mortgage to buy or refinance and you can qualify for the mortgage based on your tax filed income there are many options at best rates. You will only need to show proof you have been in business for 2 years to support your income for the mortgage application.
If you are self-employed and need a mortgage to buy or refinance and you can’t qualify for the mortgage based on your tax filed income you will need to consider one of the “stated income” programs. There are a few options
for you.
Self-employed and need a mortgage to buy or refinance
1. If you have less than 35% down payment you can access financing through an insured program by CMHC or Genworth. You will need a minimum of 10% down payment, show proof of business, good credit and proof of no taxes owed to Canada Revenue. There is a one-time insurance premium on the mortgage for this program.
2. If you have 35% or more down payment you can access financing without insuring the mortgage and save that cost. You will need to proof of business, good credit and proof of no taxes owed to Canada Revenue. Some lender programs may cover the cost of insurance if you have at least 25% down.
3. If you do not have good credit you may access alternative lending options at higher interest rates and a minimum down payment (differs by lender) of 25-35%. Additional fees will apply.
For more information on mortgage financing if you are self-employed give me a call at 604-813-8402 or email pauline@mybcmortgage.ca