Let's chat: 306-291-3817

Mia Hollinger, CPA, Associate Lic# 509769 || December 03, 2022 TMG The Mortgage Group

Self Employed Mortgages in Saskatchewan | Income is Assessed Differently

Are you self employed and looking to get a mortgage?

A self-employed individual is someone who works for themselves through securing contracts and servicing clients.

For incorporated self-employed individuals, they are considered to be self-employed if they are employed by the corporation that they themselves own and earn a salary from it.

Being self-employed includes business owners of sole proprietorships, partnerships, and corporations.

What you need to know:

You will need to have been self-employed for at least two years for your self employed income to be considered
Self-employed business owners will have their income assessed differently, as self-employed income can be artificially lower due to deductions for tax purposes
Your self-employment business income will be considered on top of your personal income
You can borrow up to 95% LTV with CMHC Mortgage Insurance or 90% with private insurers Sagen or Canada Guaranty. CMHC requires income verification while private insurers do not.
Without mortgage default insurance, you can borrow up to 80% of the purchase price with a self-employed mortgage, the same as a traditional mortgage
You will need to provide documents such as:

Income tax returns and Notices of Assessment for the last 2 years
Financial statements
Articles of Incorporation (if incorporated)
Bank Statements

Self-employed borrowers do not have to verify their income with a stated income mortgage, but stated income mortgages have higher mortgage rates and down payment requirements

Self-employed mortgages are for borrowers that rely on self-employment income or business income instead of employment income.

Being self-employed means that your income will be different from regular borrowers. A self-employed mortgage takes into account these differences, and so they will have different requirements when compared to traditional mortgages.

When mortgage lenders evaluate a traditional mortgage application, they’ll look at the net income that you declared on your tax return. For self-employed Canadians, this income amount can be artificially low due to tax deductions and expenses claimed from operating their business. With a self-employed mortgage, you’ll have more flexibility in how your income is reported. In some cases, you won’t need to verify your income with some self-employed mortgage lenders

Types of Self Employed Income Verification:

Traditional Income Confirmation

Your income, such as employment income, is verifiable through your personal tax returns.

Most self-employed business owners would not be able to confirm their “real” income traditionally.

Non-Traditional Income Confirmation

Your personal tax return doesn't reflect your true income, but your business's financial statements and bank statements can prove your actual income.

This is most common for those that are self-employed.

Stated Income

Also known as “no income verification mortgages”, you're not able to verify your income.

Anyone can state their income, however, only B Lenders and private lenders accept stated income.

Mortgages with traditional income confirmation will have the lowest mortgage interest rates and down payment requirements. Non-traditional income confirmation will come with a slightly higher mortgage rate, down payment, and may require mortgage default insurance. Stated-income mortgages have the highest mortgage rates out of the three, with large down payment requirements and restrictions on the type of property that you can buy.

Contact me mia@mortgagesbymia.ca or 306-291-3817 to discuss your situation today.