Canada Mortgage and Housing Corporation (CMHC) announced changes this month aimed at making it easier for self-employed Canadians to qualify for a mortgage.
Under the new rules, which come into effect October 1st, CMHC will give lenders more guidance and flexibility to help the self employed.
Self-employed Canadians are key contributors to strong and vibrant communities, and make up about 15% of Canada’s population, says CMHC, adding that this sector often has difficulty qualifying for a mortgage as their incomes can vary or are less predictable.
Statistics Canada reports there were 2.8 million self-employed Canadians in 2017. Numbers have been steadily increasing every year with the greatest rise in self-employed women at 15% and men at a 4% increase.
The changes include CMHC providing:
- Examples of factors that can be used to support the lender’s decision to lend to self-employed borrowers – who have been operating their business for less than 24 months, or were in the same line of work for less than 24 months – such as acquiring an established business, sufficient cash reserves, predictable earnings and previous training and education
- A broader range of documentation options to increase flexibility for satisfying income and employment requirements when qualifying self-employed borrowers, such as a Notice of Assessment (NOA) accompanied by a T1 General, the CRA Proof of Income Statement and the Statement of Business or Professional Activities (T2125) to support an “add back” approach for grossing up income for sole proprietorship and partnerships
Traditionally, stated-income mortgage products have been available to self-employed borrowers who are unable to provide traditional income verification but have a proven two-year history of responsibly managing credit and finances.
This added flexibility for proving income and employment, and helping those who have been self employed for a shorter period of time will better streamline the mortgage process for business owners.
Have questions about your options as a self-employed borrower or your mortgage in general? Answers are just a call or email away!
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