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What Is Self-Employed Mortgage In Canada?
6 minFind out everything you need to know about self-employed mortgage from this blog. Read on to find out more.
Source: Freepik
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.’
