Mortgages used to be out of reach for self-employed Canadians. Banks believed loaning them money was too risky. Times have changed. Today, more than 15 percent of Canadians are self-employed and lenders are now viewing these hard workers as viable borrowers.
Non-traditional lenders paved the way, but nowadays just about everyone is loaning money to freelancers, contractors, and commission-based workers—basically anyone who has trouble proving their income. Of course, just because these types of entrepreneurs are getting loans doesn’t mean the process is easy. The self-employed are likely to find themselves in complex mortgage situations. That means they’ll need the expertise of a skilled mortgage planner.
Some of the options a mortgage planner is likely to present to the self-employed include:
- Qualifying for a mortgage based on “stated income” which is money you say you earn. The lender is likely to ask for proof of self-employment and a hefty down payment (up to ten percent).
- Qualifying for a mortgage based on good credit history. While every situation is different you’ll probably have to prove you’ve been self-employed for at least two years.
- If you’re self-employed with poor credit and no proof of income you might be able to qualify for a mortgage based on the equity in your home. Generally, you’ll need at least a quarter of your home paid off to qualify.
- Taking advantage of “re-advanceable mortgages.” As your mortgage is paid down a line of credit opens up. This allows the self-employed homeowner to access equity without having to reapply for another loan.
Keep in mind lenders are in the business of making money. They do so by managing risk. This means the more information the self-employed (historically a high-risk candidate for loans) can provide the lender the better their chances are of getting approved. That also means it’s advantageous to have a sizable down payment.
Fortunately, the self-employed don’t have to go through the mortgage-acquiring process alone. An experienced and qualified mortgage planner can help those hard working Canadians find a mortgage that’s fits their complicated financial situation.