Since the 2008 meltdown, qualifying for a mortgage has become more difficult as lending restrictions get tougher for self-employed and commissioned workers. Some 2.67 million Canadians or 15% of the work force are (BFS business for self) self-employed. For many years the pendulum swung in their favour as lenders competed for business based on ‘stated income’ with good credit ratings. Today, good credit is not good enough and many lenders have dramatically tightened or terminated such lending as has CMHC resulting in larger down payment requirements, the return of provable income and higher interest rates and fees. Some lenders consider BFS’s higher risk even with established  businesses.  

The banks now only lend to BFS with large equity and down payments. Fortunately we still have lenders who have a strong interest and belief in BFS borrowers who will lend up to 85%, with longer amortizations, less paperwork, and who will allow secondary financing.  

If you currently have a mortgage with one of the big banks, beware. They may not renew with you at maturity, which happened to a new client of ours who had not missed a payment and his credit and business status was still good. Usually at renewal no new qualification is required. However, more lenders are now reviewing files of ‘Stated Income’ borrowers. Caution; do not write your income down to less than $15,000 since there is no tax below that amount. A surprising number of BFS’ers (their book keepers should know better) write their income down to zero.  Stated incomes are still allowed by some of our lenders but with more scrutiny, and must make sense.

Our advice is to be proactive with your income tax returns by showing a more reasonable income, and most importantly keeping up to date. Call us to do a review of your to ensure that you will be in good shape next time your mortgage matures. If you know you will have a need to borrow this year, it would  be a good idea for you to act before the Feds spring budget when more tightening is expected.