If you run your own business, work as a contractor or earn commission, you can still get a mortgage. Lenders just look at your income differently than they would for someone with a salary. Knowing how they do it, and preparing for it, can make a real difference in how much you qualify for and the rate you get.
How lenders look at your income
Most lenders use your net income (after business expenses), averaged over your last two years of tax returns. They confirm it with your Notices of Assessment (NOAs) and T1 General returns from the Canada Revenue Agency.
Two things to know:
- Write-offs work against you here. If you earned $120,000 but wrote off $40,000 in expenses, lenders generally start from $80,000.
- A drop in income counts. If your most recent year was lower than the year before, many lenders will use the lower number instead of the average.
The good news: some lenders will gross up your income by up to 15%, or add back certain deductions that aren’t real cash costs, like home office expenses and depreciation on equipment or vehicles. This can raise your qualifying income meaningfully.
If you’re incorporated, lenders look at your personal income (salary and dividends) first. Some lenders also have programs that consider income retained in your corporation.
Three paths to a mortgage
| Path | Best for | Down payment | Rate |
|---|---|---|---|
| Traditional (A lender) | Your declared income is high enough to qualify on its own | As low as 5% | Best available rates |
| Insured stated income (Business-for-Self) | 2+ years in business, strong credit, but taxable income is lower than what you actually earn | Usually 10% minimum | Close to standard rates, with a higher insurance premium |
| Alternative (B lender) | Newer businesses, irregular income or credit challenges | Usually 20% or more | Higher, often 0.5% to 1.5% above A lenders |
With a stated income program, you state an income that’s reasonable for your type of business, your industry and how long you’ve been operating. The lender and insurer then check that it makes sense, using things like bank statements, business licences and your credit history.
Part of my job is figuring out which path gets you the best result, and sometimes that means a plan to qualify on a better path a year from now.
Been in business less than two years?
You may still qualify. Lenders can consider things like prior experience in the same line of work, whether you bought an established business, your cash reserves and how well you’ve managed credit. Talk to me early so we can see what’s possible.
How to prepare
- File your taxes on time and pay any balance owing. Money owed to the CRA is one of the most common reasons self-employed files get declined.
- Separate business and personal finances. Use a dedicated business account. It makes your income much easier to document.
- Think about your write-offs before you buy. Reducing deductions for a year or two can raise your qualifying income. Talk to your accountant about the tax trade-off.
- Pay down high-interest debt and keep your credit in good standing.
- Keep your down payment in one place, with at least 90 days of statements showing where it came from.
- Talk to me early, ideally 6 to 12 months before you plan to buy.
Documents
Every file is different, but self-employed buyers can usually expect to provide:
- Two years of Notices of Assessment and full T1 General returns
- Your Statement of Business Activities (T2125) if you’re a sole proprietor
- Financial statements for the last two years if you’re incorporated
- A business licence, GST registration or articles of incorporation
- Recent business and personal bank statements
I’ll tell you exactly what’s needed for your situation and how to send it securely. Please don’t email sensitive documents.
You may also find my pre-approval guide helpful.
Frequently asked questions
How many years do I need to be self-employed to get a mortgage?
Most lenders prefer two years of self-employment history. Some lenders will approve borrowers with less than two years, especially if they have prior experience in the same line of work.
Can I get a mortgage if my taxable income is low because of write-offs?
Yes. Some lenders gross up self-employed income by up to 15% or add back certain deductions, and stated income programs can qualify you based on a reasonable income for your business.
What is a stated income mortgage?
A stated income mortgage lets self-employed borrowers qualify using a reasonable income for their business instead of the income on their tax return. Insured stated income programs usually require at least 10% down and two years in business.
Do self-employed borrowers need a bigger down payment?
Not always. Self-employed borrowers who qualify with their declared income can put down as little as 5%. Stated income programs usually require 10%, and alternative lenders often require 20% or more.
Are mortgage rates higher for self-employed borrowers?
Not necessarily. Self-employed borrowers who qualify with a traditional or insured lender can get standard rates. Alternative lenders typically charge higher rates.
Next step
Every situation is a little different. If you’d like to talk through yours, book a consultation or read more about my self-employed mortgage service.
This guide is general information, not financial or legal advice. Rules, programs and rates change, so please confirm current details with me or the official sources linked above.