If you are one of the estimated 2.6 million self-employed Canadians and you are considering purchasing a new home or a business loan for real estate investment property, you may be wondering about self-employed mortgage rates. The number of self-employed Canadians has risen steadily over the past decade, reaching a peak of almost 3 million in 2020, then dropping back down during the pandemic.
Many Canadians are wondering about the future of the economy, inflation, and, of course, mortgage rates. Even experts are divided – some seem to feel mortgage rates will continue to rise, while others see signs that they are set to once again fall.
This creates additional uncertainty for the self-employed, whose income generally varies from year to year. And while expensing items for your business makes financial sense, it also reduces your overall income on record, which can make you seem riskier to banks and traditional lenders.
What are Self-Employed Mortgage Rates?
So ARE there different self-employed mortgage rates? The short answer is no. While some lenders may offer a self-employment rate package, the real difference for the self-employed is not the rates, but the process and documentation.
Setting aside any concerns about higher self-employed mortgage rates, if you read our blog regularly, you may have seen our tips for getting approved when you are self-employed. If not, it’s worth a read. One of the biggest keys to getting approved is how you verify your income. In addition to the regular checks, for self-employed mortgages, the Canadian Mortgage and Housing Corporation recommends that lenders verify:
- Business has been in operation for two years or more.
Verified by income tax returns, GST returns, business credit reports, banking accounts, business license/articles of incorporation or verified documents from an accountant like audited financial statements. - Verified income
Accepted documentation includes a notice of assessment with T1 General or Statement of Business (T2125)
If you cannot provide sufficient documentation for your lender, your mortgage default insurance premiums may be about 2% higher than a traditional mortgage.
Renewal vs Applying for a New Mortgage
If you are renewing an existing mortgage, your employment status may not count as much as your past payment record and credit history. If they are offering good rates, it may be easier to renew with your current provider as you have built a record with them.
Keep Your Credit in Good Shape
To make it easier to get your mortgage approved – and to apply for any credit in general – is to keep your credit score high. Keeping your debt low, making regular credit card payments, and paying your bills on time are factors that help you gain and keep a solid credit score. Mortgage providers love clients with a good credit history.
Get Help from Trusted Mortgage Brokers like HW Advantage
It can be difficult navigating the requirements from different vendors when searching for self-employed mortgage rates. It’s helpful to get support and advice from a trusted mortgage broker like HW Advantage.
Mortgage brokers have access to multiple lenders, and have worked with many other self-employed clients. They understand which financial institutions may be able to help for your particular situation.
You’re busy enough managing your day-to-day business. Your mortgage broker can do all the legwork, help you collect the necessary documentation, and handle all the paperwork. Since they have access to products from many competing mortgage companies, they may even be able to get you lower rates than you would have found on your own. This saves both time AND money.
At HW Advantage, we provide strategic support that helps our clients pay off their mortgage faster and improve their overall financial well-being. Find out the advantage for yourself – contact HW Advantage today to discuss available self-employment mortgage rates for your home or investment property.
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References:
CMHC Self-Employed; https://www.cmhc-schl.gc.ca/en/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/mortgage-loan-insurance-homeownership-programs/cmhc-self-employed