Self Employed mortgages were once an easy thing to get, banks at one point would let the self employed state their income with more emphasis on the cash flow in business being more acceptable. Since the introduction of tighter rules introduced by CMHC and by OSFI the self employed mortgage has become increasingly harder to get. Self employed clients now have one of two avenues to go to get a mortgage. Self employed must now either show more income on their taxes to qualify or seek financing through private lender who are more interested in the amount of cash available to make the mortgage payment.
The Stated Income Self Employed Mortgage Program
Self employed mortgages fall under two programs, one at CMHC is a stated income program but they limit the income based on the national average for that trade. Say that you are trying to get a self employed mortgage and you have a carpentry business, while your business may bring in more money than you would work for someone else you may only claim 30000 dollars as income for the purpose of taxes. If we are stating the income for your self employed mortgage and we state more than what an average carpenter makes in Canada, say 150000 dollars it will probably be denied as the average for a carpenter would be 75000 dollars a year on a national average. This program would come with at least a 10% down payment and would get regular discounted mortgage rates.
Self Employed Mortgage Program Through Private Lenders
The second self employed mortgage program scenario is through private lenders. Private lenders are more flexible on what you state as income, they would be more likely to look at the amount of income from your business. Seeing a cash flow to them would be more important for a self employed mortgage than what you paid taxes on that year. Self employed mortgages in this scenario would see a higher down payment most likely in the 25% range and interest rates would be in the 6 to 9 % range depending on property and your actual credit score.
Self Employed mortgages, as you can see, while tougher to get can be had in today’s markets. Working with a professional mortgage broker to help with finance is the best route to take for the best results for your self employed mortgage.