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Everything to Know about Self-Employed Mortgage in Canada 2023

Mortgages are an important part of owning a home, but for self-employed people, finding a mortgage can be a complicated and challenging process. Self-employed mortgages in Canada are only sometimes easy, so borrowers need to understand their options and qualifications for a mortgage. This article seeks to provide insight into the current options and capabilities for self-employed mortgages in Canada in 2023.

How do Lenders Define "Self Employed" Borrowers?

Self-employed individuals are not employed by an employer but instead are their own boss and responsible for their own income. This can include freelancers, independent contractors, and those who own their own business.

How Much Mortgage Can Self-Employed Individuals Borrow

Mortgage default insurance allows you to take out a loan worth up to 95% of the value of your home instead of just 80% if you don't have insurance. This gives you more borrowing power, but you still need to meet specific debt service ratio requirements. These requirements depend on your income, expenses, and other financial obligations. If you can meet these requirements, you'll be able to afford the mortgage.

How Many Years As a Self-Employed Are You Eligible for a Mortgage?

Although banks and lenders usually prefer borrowers with at least two years of self-employment income, it is possible to get a mortgage if you have started your own business more recently. These types of mortgages are more difficult to qualify for and will require additional evidence of income to prove your ability to repay the loan.

Can You Get a Self-Employed Mortgage Without Proof of Income?

Self-employed individuals can obtain a mortgage without having to provide proof of income. This option is available through two mortgage default insurers, Sagen and Canada Guaranty. A down payment of at least 10% will be needed, and the borrower must use a lender that works with one of these insurers. Unfortunately, CMHC-insured mortgages require self-employed borrowers to prove their income.

Are Mortgages Higher for Self-Employed?

The rates on self-employed mortgages can vary greatly, but it is possible to obtain competitive rates as an entrepreneur. To get the best deal on a self-employed mortgage, you need a good credit score, a solid income history, and proof of a steady income. You may also need evidence that you can afford the mortgage payments.

With the right financials and a bit of shopping around, it is possible to secure a mortgage rate that is competitive with other mortgage options.

To be eligible to apply for a self-employed mortgage at a bank, you need to have been running your business or working in the same occupation for a minimum of two years. Sometimes, lenders may require a minimum of three years of documented history.

The Bottom Line

Self-employed mortgage options are becoming increasingly available in Canada, making it easier for entrepreneurs to buy homes. In 2023, those looking to apply for a self-employed mortgage can expect even more options and increased qualification criteria. By understanding their options and gathering the necessary documents, self-employed Canadians can take advantage of the great options available to them and take the first step towards achieving their dreams of home ownership.

Do you need a self-employed mortgage? Level Up Mortgages is focused on helping self employed, new immigrants, non-residents, and investors access best rate and alternative lending in Canada. Get started now.