Self Employed And Looking For A Mortgage?

Self-Employed are Stranded Looking for a Mortgage

The most common reaction we hear from the public is how much harder it is to get a mortgage these days. If you’re self-employed today, getting funding becomes a herculean problem. It was not always this way, we have provided mortgages for barbers, taxi drivers, waitresses, bartenders and even professional dancers. In today’s system, not so much. But it is not impossible.

The sad part is this is one of the fastest growing sectors. The self-employed represent 15% of the Canadian working population. Believe me, it was very easy in the past. A self-employed candidate has to fill out a form to state their income and show a Notice of Assessment to prove no taxes owing along with half decent credit. These were the glory days. So what happened? The Federal Government of Canada had enough. The Feds needed tax dollars so they instituted new mortgage rules that clients working for themselves would now have to declare all their income. As well, they also wanted to curb the black market. I only wish the people in Ottawa paid their bills like these entrepreneurial clients do, but that is for another day. The perfect storm only heightened for the self-employed when their perspective accountants wrote everything off to demonstrate no income.

So how are we providing funds for these mortgages? In many cases, the current clients have lots of equity and the private sector has been filling the gap. The problem is the rates and fees are generally highest. They can be as high as 14%.

Next came mortgage companies. You may have heard some of the radio commercials like Alpine Credit (approved). The good part is that it is very easy. The bad is that the rates are fees are only marginally better.

Today, it is getting better. Some mortgage companies are starting to look at cash flow for six months to demonstrate income and ability to pay for these business owners. The good news is that the rates are getting better. They range between 4.50% to 6.50% in general. Unfortunately, even though this helps the business in the short term, does this help in the long run with lower Canadian mortgage rates as a benefit for the future?

Only your accountant can answer this. If the tax benefits exceed the higher mortgage costs, then maybe a market has been sent for the future business owners of Canada. Time will tell.

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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