Many self employed workers enjoy a great lifestyle with a high standard of living, however on paper they don’t fit into the typical model of what lenders like to see. When done properly write-offs can reduce your income, ensuring you pay the least amount of taxes possible. However, when you apply for a mortgage, lenders are looking at income from the last two years from Revenue Canada, Notice of Assessments. If these are too low, you won’t qualify. Here’s the way around these issues.
Plan for your mortgage application: In the two years prior to applying for a mortgage write-off less. Your income appears larger and increases your chances of getting a mortgage. Unfortunately this means you’ll pay more in taxes for these two years.
Have a professional accountant handle your books and taxes: Banks prefer to see a professional handling the finances. This way they’re more sure of accuracy rather than trusting a do-it-yourselfer. All in all, you’ll end up saving money having a professional do your books, because they’re so much more efficient.
Don’t take extended vacation, leave of absence or sabbatical until after approval: In the two years leading up to mortgage application it’s your job to make as much money on paper as possible. In other words work hard to proof to the lenders you can pay your mortgage. If you’re needing some time away, plan it for after you’ve purchased your new home.
Ask your Mortgage Broker about Stated Income: Although not all lenders offer this, it can be an option. It’s based on you being in the same position for at least two years prior to becoming self employed. The lender does research into your industry and job position and bases your income on the average. However they won’t just take your word for it. You’ll have to show bank statements and deposits for proof. Try doing a little research yourself and see how you compare to the industry average. That way there aren’t any surprises when your mortgage broker enters into negotiations with lenders.
If you are self employed, contact me today for more information on getting a mortgage in Toronto and Brampton.
