Peter (alias) came to see us over five years ago. He owned a restaurant and was considered self-employed. He originally bought the home in 2011 but due to the lack of mortgage self-employed programs he was in a secondary type financing with Home Trust. Peter believed he deserved better, and so did we.

We were able to secure an excellent five year fixed mortgage with a major bank for 3.04%. In the past term he had been flawless in paying back his mortgage and so we believed that the bank would be happy to refinance his mortgage for $60,000. Not so fast, it did not happen. The government and the bank have change the rules. In essence, the government wants the self-employed to start declaring their money. This will have a profound effect on the future of being your own boss. Here are some tips you must learn before you apply for a mortgage that will improve your odds of getting one:

1. Non-reliable income. This is the big one. Where before income did not matter as much, now it is important to see that you declare personal income. I suspect the government is strongly behind this. How can self-employed owners have such luxurious homes. Needless to say they’re after more tax dollars and business owners are the perfect target.

2. Planning for a purchase. With self-employed Canadians totalling close to 3 million, proper planning is vital. Business owners should visit a reputable mortgage broker and their accountant to properly plan for approval. This should be now done one year prior to financing or purchasing. As I stated above, be prepared to declare more revenue. This is something that will change the way a Canadian accountant now prepares his clients.

3. Bigger down payments. Very simply, the larger the down payment the last risk for the bank and the better chance for approval.

4. Excessive documentation. The biggest complaint we receive from business owners is the amount of paperwork banks require. Examples of paperwork would include: financial statements or T1 generals with business statements. Business license. The past 2 to 3 years notices of assessment. Business bank statements showing regular and constant income. Paid proof of HST, especially for contractors.

5. Impeccable credit. Enough said there!

So there you have it. The proper preparation for a self-employed client is not easy but certainly achievable. In many of these circumstances though, something does not add up to acquire a primary mortgage. A good mortgage professional can also shop in the secondary market for financing and educate clients to eventually get the primary market.

Robert can be contacted at 905-574-9200 Ext. 215 OR by email at mortgages@robertfloris.com. You can fill out an application online at https://application.malink.ca:8112/App/MARC/FLORISR/en-ca/1896 with absolutely no pressure and no obligation.

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