Everything You Should Know About Self-employed Mortgages In Ontario
According to a 2016 census, around 12.1% of workers in Ontario are self-employed. The Covid-19 pandemic has influenced the employment market to a huge extent. It is estimated that by 2023 around 7 million Canadians will become self-employed. Even though the number of self-employed people is on the rise, obtaining a mortgage for self-employed Ontario is not easy.
Taking out a mortgage for self-employed people is not easy primarily because they often can’t show proof of their income. Moreover, business owners are encouraged to spend as much as possible. It helps in reducing their taxable amount. But many money lenders are not in favor of these expenses. Keep reading to understand the various conditions for obtaining a mortgage for self-employed people.
Requirements For Self-employed Mortgages In Ontario
If you are self-employed and want to obtain a mortgage, your lender will ask you to show the personal tax Notices of Assessment. The document should be from the past two or three years. You will have to include this document with your mortgage application. Being able to provide proof of income will ensure that you can get the same mortgage rates as other borrowers.
But people who can’t provide proof of income need to have a good credit history. If you can’t show proof of income, you also need to make a 10% down payment minimum. Canadian Mortgage and Housing Corporation no longer offers self-employed mortgages without proof of income.
Other Requirements For Self-Employed People To Gain Mortgage In Ontario
Like obtaining private second mortgages in Toronto, a borrower also needs to provide other documents to obtain a self-employed mortgage. The other documents that need to be submitted with your mortgage application are as follows:
- Financial statements of the business that you own
- Proof of GST and HST paid in full
- Contracts revealing estimated revenue in the upcoming years
- Your business as well as personal credit scores
- Evidence supporting that your principal ownership in the business
- A copy of Article of Incorporation or GST license proving that you are licensed
- Evidence showing that your down payment isn’t gifted
Default Insurance Rates For Self-Employed Mortgages In Ontario
If you show your income via your personal tax Notices of Assessment, the default insurance rates for self-employment mortgages will be the same as traditional ones. You will have to pay a premium for a mortgage for self-employed in Ontario when you are putting down above 5% and below 19.99%.
But you are not required to pay the premium when you put down above 20% or more. The premium amount will be added to your mortgage amount. You will need to pay it off within the repayment period of your loan.
Wrapping Up
You can talk to a mortgage broker before taking out a self-employment mortgage. A mortgage broker will know which lender specializes in self-employed mortgages. They will have contact with several lenders in Ontario and help in finding the lender most suitable for you.
