Mortgages for the self-employed
When you run your own business or work on contract, your income doesn’t always look the way a standard application expects. A mortgage professional who works with self-employed borrowers knows which lenders look at your full picture.
Key points
- Self-employed borrowers get the same mortgages. What changes is how you prove your income.
- Most lenders average your last two years of income from your tax assessments.
- Business write-offs lower your taxable income, and with it, how much you may qualify for.
- Some lenders have programs built for business owners, so comparing lenders matters more than usual.
How self-employed mortgages work
There’s no special mortgage for self-employed people. You get the same rates and terms as anyone else, if you qualify. The difference is proof of income. Without pay stubs, lenders rely on your tax returns, your Notices of Assessment from the CRA and, for incorporated businesses, your company’s financial statements.
What lenders ask for
The documents depend on how your business is set up and how long you’ve been running it.
| Your situation | What lenders usually ask for |
|---|---|
| Sole proprietor | Two years of T1 General returns and Notices of Assessment |
| Incorporated business | The above, plus two years of company financial statements |
| Commission earner | Two years of tax returns, plus a recent employer letter |
| Less than two years in business | Proof of prior experience in the same field, and a larger down payment |
How NorthMerit can help
Tell us what you’re planning and we’ll connect you with one licensed mortgage professional who compares lenders for you. It’s free, and there’s no obligation.
How lenders see your income
Most lenders take the income on line 15000 of your tax return and average your last two years. If your income has gone up, some lenders lean on the most recent year. If it went down, expect them to use the lower figure.
The effect of write-offs
Every legitimate expense you claim lowers your taxable income. That’s good for your tax bill, but it can make you look like you earn less than you do. Some lenders add back certain items, like depreciation or home office costs. Others offer programs that look at your business’s overall strength.
How write-offs change the picture
Here’s how the same business can look to a lender depending on which number is used.
Your lender options
Many business owners start with an alternative lender, build a stronger two-year record, then move to a major lender at renewal.
| Lender type | Usually needs | Trade-off |
|---|---|---|
| Major banks and credit unions | Two years of stable, well-documented income | Best rates, strictest rules |
| Self-employed programs | Strong credit and a solid business, even with lower taxable income | Slightly higher rates or insurance premiums |
| Alternative lenders | Equity in the property and a reasonable explanation of income | Higher rates and fees, often for a shorter term |
How to strengthen your application
Keep business and personal money in separate accounts, so your income is easy to follow. File your taxes on time and clear any balance owing to the CRA, because lenders treat unpaid tax seriously. If you’re planning to buy in the next year or two, talk to your accountant about how much you write off, and to a mortgage professional about how lenders will see it.
Common questions
What documents will I need?
I write off a lot of expenses. Will that hurt me?
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