Facing difficulties in securing a Self-Employed Mortgage in Ontario?
If you are a self-employed Canadian, your hands are probably already full. Whether it is a self-run business or a freelance gig, there are many aspects one has to look after to ensure one has access to a regular flow of income. The ever-increasing number of self-employed individuals in the country has obviously led to a rise in the number of freelancers and self business makers turning to Private Lenders to get their Mortgage’s approved.
And getting a Self-Employed Mortgage in Toronto isn’t an easy deal. Most lenders are concerned that your unsteady source income won’t make you enough money to pay monthly payments against your loan. There are certain Private Lenders in Ontario who do not want to involve in the additional paperwork that’s needed to approve a Mortgage for self-employed individuals. Then there are stringent rules and underwriting guidelines of the big Canadian banks which make it difficult for this growing demographic of self-employed individuals to obtain a Mortgage.
Obtaining a Mortgage when you’re Self-Employed
To many lenders, self-employed borrowers don’t come across as ideal borrowers. Even if they succeed to secure a Self-Employed Mortgage, they are expected to pay higher interest rates as compared to loans promoted on several Mortgage websites. The complicated and convoluted process that an applicant has to involve in while acquiring a Mortgage is still a prominent issue among self-employed individuals.
In 2014, the Canadian Mortgage and Housing Corporation ceased Mortgages for self-employed Canadian nationals without third-party verification.
Most lenders ask borrowers to share the personal tax Notices of Assessment from the past 2-3 years included with the Mortgage Application. If as a self-employed borrower, you are able to attach the details with your application, accessing regular Mortgage offers becomes comparatively easier. If you cannot, you must have a good credit history along with making a20% down payment.
Those who apply for a Self-Employed Mortgage in Ontario usually depend on stated income applications. Borrowers who face complexities in showing their income proof via traditional means often use this application. A stated application is calculated based on the amount earned as claimed by applicants. This further needs a signed income declaration and proof of self-employment. You need the under-mentioned documentation:
- Proof of HST/GST payment.
- Notice of Assessment from the Canada Revenue Agency (CRA) to prove that the applicant doesn’t have any outstanding payment.
- IT-return from the past two or three years. Income tax Returns that depict a revenue loss are generally don’t leave a good impression.
- A proof of your business license or articles of incorporation as evidence.
- Pacts, bonds, or agreements demonstrating your estimated revenue for the next couple of years. A proof of your income being consistent for the future is an advantage.
- Accurate business financial statements including revenue, expenses, and break-even point.
- Business and personal bank statements for the past 6 months to 12 months.
Apart from analyzing the stated income, Private Lenders in Ontario audit a borrower’s debt service ratio before approving a Mortgage. A debt service ratio calculates one’s ability to make monthly payments on scheduled dates. A good credit score also proves beneficial for self-employed borrowers. You can connect with a reliable Mortgage Agent in Ontario to check your credit score. A trustworthy Mortgage Agent in Ontario will connect you with alternative lenders who’d deem your application with flexible terms and conditions.
How to Qualify for a Mortgage If You’re Self-Employed?
You can definitely appear attractive to a Private Lender in Ontario and qualify for a Self-Employed Mortgage in Ontario if you can:
1. Pay your Taxes on Time
All salaried individuals in Canada pay a chunk of their salary as taxes. As a self-employed individual, you make those deductions on your own. Leading Mortgage Agents in Ontario will advise you to pay your taxes irrespective of the industry you work in. Most potential lenders will ask for your income documentation for the past two years to review the personal income tax returns you’ve paid up.
2. Good Credit History Helps
A conventional Mortgage needs you to maintain a credit score of 620. But if you own your business or take up freelance projects to earn money, a higher credit score comes really handy. Try to keep your credit score close to 700 or more while applying for a self loan. A potential borrower with less than a 700 credit score is often seen as a risk. So, pay off your phone bills, credit card EMI, car payments on time.
3. Plan What You Can Afford
You need to pay your Mortgage on a monthly basis. It doesn’t matter where you earn your income from, saving up enough money to cover your monthly Mortgage payment is really important. A lot of self-employed Canadians make variable income on a project basis. If you are one of those, it is advisable to plan your loan payment keeping your variable income in mind. For someone who makes $1000 one month and earns $3000 the next, it’s better to plan a monthly Mortgage that doesn’t exceed what they make in their slowest months.
4. Find a Dependable Mortgage Agent in Ontario
You might have a wonderful relationship with your bank. They might love you as a client. However, banks have lately become too stringent with their underwritten rules and might leave you in a fix when it comes to access a Self-Employed Mortgage in Ontario. The best alternate to get access to a fast-paced Self-Employed Mortgage is a reliable and genuine Mortgage Agent who helps you in landing the best package that suits your needs. Mortgage Agents or Brokers in Ontario have formed a long-lasting relationship with leading private lenders. These lenders might not trust you, but they’d definitely rely upon agents and will approve your loan instantly.
As a report published by the Bank of Canada, the share of Private Lenders in the mortgage market in Greater Toronto has doubled since 2015. These lenders rather than focusing on your income, stress upon the property value. So, if you have difficulty in proving an inadequate record of income to qualify for a Mortgage, you can always reach out to a dependable Mortgage Agent like Shawn Sef with Equity Mainly Matters. Shawn is well-recognized in the Toronto/OntarioMarket as he is well known for offering budget-solution in the form of First and Second Mortgage, Private Mortgages, Refinance Mortgages, Home Equity Loans, Commercial Mortgages, HELOC (Home Equity Line of Credit), and many other excellent Mortgage Solutions.