What Is Self-Employed Mortgage In GTA, Canada?

Are you self-employed and looking for a mortgage to purchase your home?

According to Statistics Canada, around 2.9 million Canadians were self-employed in 2018. And, given the present pandemic situation, that number could have risen. The number of self-employed people is growing for many reasons, including flexible work hours, unlimited growth potential, and several tax rewards.

Although the size of self-employed people is increasing rapidly, the difficulty in getting a mortgage remains the same.

Let us understand self-employed mortgages and how they function if you are a self-employed individual.

What is a self-employed mortgage?

A self-employed mortgage is a loan provided to a self-employed person.

It is a type of loan designed for self-employed, small-business owners, or otherwise deemed to have insufficient income supporting the purchase of a home. You can get a self-employed mortgage from banks or private lenders.

How can you get a self-employed mortgage?

Apart from private lenders, many crown companies also provide self-employed mortgages to assist you in purchasing your dream home. It is up to a lender to determine what factors they consider when approving a mortgage. But some of the most important things you can do to boost your chances of getting a mortgage are below.

Create and show a record of accomplishment of your self-employment.
Make a substantial down payment on the house and gain the lender’s confidence in you.
Do have a significant cash reserve as your emergency fund.
Pay any debts off your credit cards.

What are the required documents for getting a self-employed mortgage?

You need to list some papers that may be required to be evaluated besides your Notices of Assessment below:

Financial statements of your business and any other income going into your account.
Proof that you pay your taxes consistently.
A copy of your business license.
Your personal and business credit score.
Documents showing your expected income in the future.
A credit check if asked by the lender.
Documents proving you are the rightful owner of your business.

The lender may also request additional documents depending on the requirements.

What are the pros and cons of a self-employed mortgage?

Pros:

1. Accessibility and availability:

Self-employed mortgages have a faster application process, and many lenders will lend you money if you have all the documentation.

2. You can invest in the house you want to buy:

With the availability of a self-employed mortgage, you can buy your dream house easily.

Cons:

1. Interest rate:

Self-employed mortgages have an extremely high interest rate apart from the lender’s fees.

2. Attaining all documents:

For a mortgage to be approved, you need to have all the documents ready. Unless you have those, your mortgage will not even start.

3. Poor credit score:

If lenders reject you, your credit score may get damaged due to too many credit inquiries.

So now you know what a self-employed mortgage is and how to apply for one if you work for yourself. If you want to find out how to apply for a mortgage, read ‘Step by Step Guide to Applying for Mortgage.’