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Mortgage Tips - Tips For The Self Employed
If you are considering starting your own business, and if it means leaving your current employment to do so; you may want to ensure your mortgage is set up the way you will want it for the next few years before making that leap. As lenders consider self-employed people, they want some assurance that the business venture is viable. To assess that, they will ask to see copies of the applicant’s taxation records for the most recent 2 or 3 years of self-employment.
Without that much time to show some income, you would not be able to shop your mortgage around for your best benefit. You would be restricted to simply renewing at the same institution, which is often a choice which can cost you thousands of dollars.
If you are already self-employed, here are some suggestions to consider:
- always pay taxes right away so your Notice of Assessment from Revenue Canada does not show any taxes in arrears
- file your taxes promptly, so that you will have current documents to show the lenders when you are applying
- if taking equity out of your home, try and limit your mortgage to not more than 75% of the value of your home; some lenders will accept a self-declared letter of income (with no proof required), but they will only do that if you have at least 25% equity in your home so the property itself is some buffer for the lender against the risk they are taking
- if there is ‘extra’ income that you are not sure whether to declare or not, remember that the higher your income shown on taxation records, the better chance you will have to shop for the mortgage of your choice
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