Many Canadians have seen their employment situation change significantly in the last couple of years. Sometimes a job loss due to downsizing, restructuring, or COVID allows you to become your own boss.
There are more self-employed people in Guelph than ever before, and this trend does not appear to be slowing down. For many, self-employment is a second job or new business venture that grows while regular employment is maintained.
The biggest reason self-employed people run into a challenge with their mortgage is that they don’t have good records of their income. Mortgage lenders love to see income that is claimed with CRA and documentable.
Suppose you don’t have the right documents in place. In that case, you could end up with a higher interest rate than you deserve, or you could be approved for a lower amount or declined altogether.
So, how can the self-employed save on their mortgage payments?
WealthTrack’s, David Pipe shares three tips to make the mortgage process easier for those who are self-employed.
Declare Your Income
If you have the flexibility to claim more or less income on your tax return, some people choose to declare the minimum amount. While this idea might look good on your taxes, be careful since you might not be able to use the higher amount for qualifying on your mortgage application. Remember, whatever CRA sees is what the lender will see.
If you have been self-employed for two or more tax-years, using your declared income is great because it allows you to access the same great mortgage rates as those with regular employment income.
Keep Good Records
Aside from using declared income on your tax return, you might be better off using a program called “stated income” to qualify. This means that the lender will look at your business’s gross revenue and your net income together and will allow you to state what your income is for the application. This idea may sound great, but stated income comes with some rules around what is reasonable. Stated income programs also usually come with a higher interest rate.
Stay Current with CRA
This might go without saying. Remember that if you are not up to date with filing your taxes, you will have a much harder time getting a mortgage. Also, if you have a balance owing with CRA, you may need to pay that off or add it to your mortgage so that the lender will pay it off before you can close on your home.
Don’t let the process stop you from moving into that dream home for your family. Self-employed professionals can get access to great mortgage options too. If you want to learn more about how to get the best mortgage for your situation, contact David Pipe or visit WealthTrack.ca.