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Mortgage Financing For Self Employed Individuals

Mortgage financing can be tricky when you are self-employed.


Most business owners offset/write off their business income with business expenses to reduce the income they need to pay taxes on. While this is acceptable to Canada Revenue Agency, it creates challenges when getting a mortgage. With mortgage financing, bank policies haven't changed much over the years, even though how people earn income has. The bank continues to strongly prefer lending money to people based on how much income the owner of the business has declared and paid taxes on. As a result, self-employed individuals are often left frustrated (by the banks they do their banking at) as they know what they can afford to pay in mortgage payments. Still, the bank's definition of affordability is entirely different. 


The "broker channel," as we call it, has many lenders (besides banks) willing to look beyond how much income is being declared. Many of these lenders offer programs and flexibilities explicitly designed for self-employed people and take a more common-sense approach when it comes to determining a business owner's income. 

One of the increasingly common methods available to us to determine how much income a business owner is earning is to prepare a cashflow analysis of their business which we do by reviewing the cash in and out of the bank account. Someone with good credit, who is not carrying much debt, and has been in business for a while, is generally considered a good risk. For those that have recently transitioned to being self-employed, we can also access programs for those situations as well.

 Our focus is to find ways to say yes, instead of saying no. 

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