Self-Employed Mortgages in Canada
Qualifying, Requirements & CMHC Program

About 15% of Canadians are self-employed, making them an important group in the mortgage and financing industry. If you’re self-employed and looking for a mortgage, the process is different from that of salaried employees. Here’s what you need to know.

 

What are self-employed mortgages?

Self-employed individuals work for themselves. This includes business owners, contractors, and freelancers. Since you don’t receive a regular paycheck, lenders need more documentation to assess your financial stability. As a result, the mortgage process for self-employed individuals differs from that of salaried employees.


Documentation Needed for Self-Employed Mortgages

When applying for a mortgage as a self-employed individual, there are specific documentation requirements in addition to the standard documents. These include:

  1. Proof of Business Ownership: Your Business registration certificate.
  2. Personal Tax Documents: T1 Generals and Notice of Assessments (NOAs) for the last two years to verify personal income.
  3. Business Financial Statements: T2 corporate tax returns or accountant-prepared financial statements (including income statement and balance sheet) along with NOAs for the last two years.
  4. Business Bank Statements: Typically, 6-12 months of business bank statements may be required to verify cash flow and business health.

Qualify for a Mortgage as a Self-Employed Individual

 

To qualify for a self-employed mortgage, most lenders require the following:

 

  • Personal Tax NOA and T1 Generals for the last two years.
  • Lenders usually assess net income, which may limit how much you can borrow. However, some alternative lenders may use six months of income to get a clearer picture of your financial situation.
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Self-Employed Categories and Mortgage Options

Additionally, Self-employed individuals may be classified into different categories based on the documentation they can provide, which affects their down payment and interest rates. Here’s an overview of the categories:

  1. No Tax Documents Provided:
    • If you are unable to provide Revenue Canada tax documents, you’ll likely need a 20% down payment. Additionally, you may face higher interest rates.
  2. Tax Documents Provided but Low Income:
    • If you can provide tax documents but your income is insufficient due to deductions or write-offs, you may be required to put down at least 10%, with standard interest rates. However, if you are relying on stated income and a lower down payment (less than 20%), you will likely face higher default insurance premiums.
  3. Tax Documents and Sufficient Income:
    • If you can provide tax documents and have a sufficient income to meet lender requirements, there are typically no restrictions on the mortgage process. This allows you to access more favorable loan terms and interest rates.

CMHC Self-Employed Program

 

The Canada Mortgage and Housing Corporation (CMHC) Self-Employed program offers a special program for self-employed individuals. This program includes options for low down payments and mortgage loan insurance, helping to make homeownership more accessible for self-employed borrowers. If you meet the program’s requirements, it can be an excellent option for securing an affordable mortgage.

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