What Is a Self-Employed
Mortgage?

With new mortgage rules, obtaining a mortgage for self-employed individuals has become more difficult. Those who work for themselves are often facing a much more strenuous process.

How Self Employed Mortgages Differ

Unlike salaried employees, those who work for themselves don’t receive regular pay, nor do they receive a printed T4 at the end of the year. While they may be making a decent amount of money, their income is best described as ‘inconsistent.’ For this reason, many of the major financial institutions consider self-employed individuals high risk.

What to Expect

If you’re self-employed, you should expect to pay higher interest rates than those commonly advertised on mortgage websites. Those rates are for prime borrowers, or borrowers who are considered to be particularly creditworthy because of their steady, verifiable income. Similarly, you may have a reduced ability to shop around and negotiate a lower interest rate, or be required to come up with a larger down payment. Working with a qualified mortgage broker will help you through the entire process.

Securing A Self Employed Mortgage

A mortgage broker will help ensure the lender knows you can make your payments, no matter what business is like. Here’s what you’ll need to provide in order to secure a mortgage:

Proof of Income

In most instances, you’ll be required to provide proof of steady income over two years. Lenders will take into consideration that small business owners claim expenses, which can make their income appear lower.

Excellent Credit History

A good credit score will help you immensely. Keeping your personal debt levels low will increase your chances of securing a mortgage.

Other Paperwork

Keep a file of important documents including tax returns and business registration in case your lender needs them. Make copies, if necessary.

Larger Down Payment

While 5% can be deemed acceptable for salaried employees, self-employed individuals should expect to be required to have at least 10% and as high as 20% as a down payment. Talk to your GLM Mortgage Group professional for more information.

One more thing to consider is the location of your business, which may help determine whether it’ll prove busy and profitable year-round.

While the journey to home ownership can be daunting, we’ll ensure you have all the information you need to make a sound decision and help you understand all your options. It’s important for you to do your own research as, the more you prepare yourself, the more desirable you’ll be in the eyes of the lender.