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Self-Employed Mortgage Options in Canada
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Getting a mortgage when you’re self-employed in Canada can feel like trying to squeeze into a box that wasn’t made for you. Your income isn’t always consistent, paperwork is trickier, and traditional lenders may not be as flexible. But that doesn’t mean it’s impossible. In fact, with the right approach and the right lender, you can absolutely secure a mortgage that fits your needs—even if your paycheques don’t come in the usual way. Let’s break it all down.
Qualifying for a Self-Employed Mortgage
If you’re your own boss, lenders want to know one thing: Can you pay back the loan? That means proving you’ve had a steady stream of income for at least two years. Usually, they’ll ask for your Notices of Assessment (NOAs), T1 tax returns, and maybe business bank statements or financial statements if you run a corporation.
Let’s say you’re a freelance graphic designer making ₹1.5 lakh a month. As long as you can show a consistent income pattern over the last 2+ years, many lenders will consider you for a mortgage—though not necessarily the big banks.
👤 4 Types of Self-Employed Mortgage Applicants in Canada
If you’re self-employed and looking to qualify for a mortgage, lenders may treat your application differently depending on your business structure and income history. Here’s how the four main categories break down:
📌 Sole Proprietor (With Income Proof)
Provides 2+ years of Notice of Assessment, T1 Generals, and business bank statements. Treated similarly to salaried borrowers but with extra scrutiny on consistency of income.
📌 Sole Proprietor (Without Strong Income Proof)
Uses stated income or alternative lending. Higher interest rates and larger down payment often required. May need a co-signer or business license proof.
📌 Incorporated (T4 or Dividends)
May pay self a T4 salary or dividends. Lenders will look at personal income as well as corporate financials. Stable, verifiable income = better rates.
📌 Incorporated (No Regular Draw or Complex Finances)
Income may be retained in the corporation. Requires detailed accountant-prepared financials and may need an alternative lender or stated income approach.
💡 Tip: No matter your category, clean bank statements and strong credit history will make your self-employed mortgage journey smoother.
Lender Options for Self-Employed Mortgages
Not all lenders treat self-employed borrowers the same way. Here’s a breakdown:
– A Lenders (banks and credit unions): These guys play it safe. They want squeaky clean credit and perfect paperwork. If you’ve got strong income proof and pass the stress test, you might qualify here with the best rates.
– B Lenders (alternative lenders): They’re more lenient on paperwork and will work with those who’ve been self-employed for a shorter period or have lower credit scores. Expect slightly higher interest rates.
– Private Lenders: These are last-resort options. They care less about income and more about the value of your home. Great if you’re in a pinch, but rates can be high.
🏦 Compare A, B, and Private Mortgage Lenders in Canada
Not all lenders are the same. Here’s how Canada’s three types of lenders stack up in terms of interest rates, flexibility, and borrower requirements:
| 📋 Feature | A Lenders (Banks & Big Credit Unions) |
B Lenders (Alt-A or Trust Companies) |
Private Lenders |
|---|---|---|---|
| Interest Rates | ✅ Lowest (e.g., 4.5%–5.5%) | ⚠️ Moderate (e.g., 5.5%–7%) | ❌ High (8%–12%) |
| Credit Score Requirement | ✅ 680+ | ✅ 550–679 | 🚫 No strict minimum |
| Income Verification | ✅ Full documents required | ⚠️ Flexible or stated income accepted | 🚫 Usually not required |
| Use Case | Best for salaried, low-risk borrowers | Best for self-employed or bruised credit | Last-resort or short-term borrowing |
| Down Payment Needed | As low as 5% | At least 20% | 25%–35% or more |
| Flexibility | ❌ Rigid guidelines | ✅ More flexible underwriting | ✅ Extremely flexible but expensive |
| Typical Term | 1–5 years | 1–3 years | 6–18 months |
💡 Tip: While A lenders offer the best rates, B and private lenders help bridge gaps for borrowers who don’t qualify through traditional channels.
Mortgage Default Insurance for the Self-Employed
If your down payment is less than 20%, you’ll need mortgage default insurance. And yes, self-employed folks can still qualify—but you’ll need to prove your income through NOAs and T1s. If you can’t, you might still get insured, but only through private insurers like Sagen or Canada Guaranty (not CMHC).
📋 CMHC Insurance Premiums – By Down Payment & Documentation
Your mortgage default insurance premium depends on how much you put down — and whether you have full income documentation or not. Here’s a quick breakdown:
| Down Payment (%) | Standard Income Docs (T4s, NOAs) | Alternative/Stated Income |
|---|---|---|
| 5% – 9.99% | 4.00% | Up to 7.00% |
| 10% – 14.99% | 3.10% | Up to 5.50% |
| 15% – 19.99% | 2.80% | Up to 4.50% |
| 20% or more | 🚫 Not Required | 🚫 Not Required |
💡 Note: These are typical CMHC premiums for owner-occupied homes. Alternative lenders may charge higher premiums under stated income or BFS programs.
What Is a Stated Income Mortgage?
A stated income mortgage lets you declare your income without the usual proof—like a letter to the lender saying ‘trust me, I make this much.’ Of course, the amount has to be reasonable for your industry. These are usually insured privately, need a decent credit score, and come with stricter lending conditions. Still, for many freelancers or seasonal workers, they can be a good solution.
🧾 How a Stated Income Mortgage Works for Freelancers
Self-employed borrowers like freelancers often don’t have consistent T4 income. Here’s how lenders use a “stated income” model instead — based on trust, documentation, and reasonability.
👩 Meet Priya:
A freelance graphic designer in Toronto earning ~$85,000/year from multiple clients. She writes off many business expenses, so her taxable income is only ~$42,000/year.
💡 Lender Approach:
- Priya applies with a stated income of $80,000, backed by business bank statements and client invoices.
- Lender accepts the stated income as “reasonable” for her profession and lifestyle.
- Since she doesn’t qualify under traditional rules, she’s approved through a B lender.
📌 Mortgage Terms She Received:
- Down payment: 20%
- Interest rate: 6.2%
- Term: 2-year fixed
- Lender fee: 1.5%
✅ Final Tip: Stated income programs are great for freelancers, but you must keep clean records, show consistency, and work with a broker who knows alt-lending well.
Tips to Improve Your Approval Odds
If you’re planning to apply soon, here are a few ways to increase your chances:
– Get your documents in order—especially tax returns and business income statements.
– Keep your credit score healthy (above 680 if possible).
– Save for a larger down payment (20%+ opens up more options).
– Consider getting a co-signer if your income is borderline.
📋 Getting Mortgage-Ready as a Self-Employed Canadian
Self-employed? Getting approved for a mortgage takes some prep. Here’s a checklist to help you get everything in order before approaching a lender or broker.
- ✅ Last 2 Years of T1 Generals – Personal tax returns showing declared income
- ✅ Notices of Assessment (NOAs) – From CRA, confirming taxes paid and income declared
- ✅ Business Financial Statements – If incorporated, include balance sheet and income statement
- ✅ Business Bank Statements – At least 6–12 months showing regular income flow
- ✅ Proof of Business Registration – GST/HST number, incorporation docs, or license
- ✅ Client Invoices or Contracts – Helpful to show ongoing income sources
- ✅ Credit Score Check – Ideally 650+, check with Equifax or TransUnion in advance
- ✅ Down Payment Confirmation – From savings, RRSP, gift letter, or business income
- ✅ Explanation Letter (if needed) – For any major gaps, changes, or irregularities
💡 Tip: Organize your documents in a folder and review with a mortgage broker familiar with self-employed clients.
Frequently Asked Questions
**Can I get a mortgage without full income proof?** Yes, but usually through a B or private lender, and at higher rates.
**What documents are most important?** T1s, NOAs, business bank statements, and proof of HST/GST payments.
**What about credit score?** Aim for 680+ to keep doors open. Lower scores can still work but may limit options.
Final Thoughts
Being self-employed shouldn’t stop you from owning a home in Canada—it just means taking a different route. Focus on documenting your income, improving your credit, and exploring lender options beyond the big banks. And if you’re feeling overwhelmed, a mortgage broker who understands self-employed files can be your best friend in this journey. Don’t settle—shop around, stay prepared, and own your journey as proudly as you own your business.
