The government snuck in through the back door. There should be a public outcry but very few know.
There was no annoucnement from the Finance Minister Jim Flaherty in his recent speech about changes to mortgages in Canada. But last week we received a communique which states that as of April 9th, CMCH will not be insured mortgages for self employed if their income does not debt service. We made several calls to find out if this is correct. It is. Over the last five year over self employed clients were able to state a reasonable income as long as they had good credit. We proved they were self employed through a GST statement or Articles of Incorporation. We did not have to prove their income. Self employeds traditionally write down their gross income and they were able to purchase with minimum down and refinance their homes up to 90 per cent o the value.
As of April 9th, self employed people will have to show what they earn on Line 150 of their tax returns, average it for two years and add 15% to the amount. Accountants need to be aware of this because they are in the business of finding ways to reduce taxes for self employed clients which could spell financial suicide.
This new initiative will make it much more difficult for self employeds to get prime mortgages in Canada. This makes us angry. Why would the government want to make it tougher and more difficult for self employeds to obtain financing during a recession. This is a big step backward in a time when the government should be encouraging the low of money.
Self employed people are now not being treated equal to their employed cousins because they are able to use an an employees gross income to debt service whereas self employeds are being told the banks are going to judge them by their ‘net’ earnings. This is discrimination and unfair.
So bottom line is if you are sel employed you have only a few weeks if you plan to refinace or plan to purchase a house. We are going back to the old days where sel employeds as second class citizens. Higher rates and minimum equity take outs will now be the standard for self employeds. We are being punished for the sins across the border. Unlike the States, Canadians can be sued personally if they walk away from their mortgages and we are not able to write of our mortgage interest. We see this as the government’s way of getting self employed people to pay more tax.
The governement has forgotten who has helped to make this country strong. Self employed people , the backbone of the Canadian economy will again be left to their own means to finding money at a time when we should be encouraging businesses to expand and thrive.
If you are self employed and have been contemplating refinancing or purchasing call us immediately to an approval before the new rules take effect and if you know someone who is self employed please tell them to call us as soon as possible.