How Do Self-Employed Mortgages Work in Ontario?
If you’re self-employed in Ontario and looking to buy a home, you might be wondering how mortgage approval works when you don’t have a traditional paycheck. Unlike salaried employees, self-employed individuals often face stricter scrutiny when applying for a mortgage. However, with the right preparation, securing a self-employed mortgage in Canada is entirely possible.
How Lenders Evaluate Self-Employed Borrowers
Since self-employed income can fluctuate, lenders assess applications differently than they would for traditional employees. Here’s what they typically look for:
- Proof of Income – Instead of pay stubs, you’ll need to provide:
- Two years of T1 General tax returns (Notice of Assessment)
- Financial statements or business revenue reports
- Bank statements showing consistent deposits
- Credit Score – A strong credit score (680+) improves your chances of approval.
- Down Payment – Self-employed borrowers often need a larger down payment (typically 10-20%, sometimes more).
- Debt-to-Income Ratio (DTI) – Lenders prefer a DTI below 42-44%, meaning your monthly debts (including the new mortgage) shouldn’t exceed this percentage of your income.
Mortgage Options for Self-Employed Individuals
1. Traditional Mortgage
- Best for those with strong, documented income.
- Requires full income verification via tax returns.
2. Stated Income Mortgage
- Some lenders offer mortgages where you “state” your income without full documentation.
- Higher interest rates and larger down payments may apply.
3. Alternative Lenders
- If big banks decline your application, private or B lenders may approve you at slightly higher rates.
Tips to Improve Your Approval Odds
- Keep Clean Financial Records – Organized bookkeeping strengthens your application.
- Minimize Debt – Pay down existing loans to improve your DTI ratio.
- Save a Larger Down Payment – This reduces lender risk and may help secure better terms.
Final Thoughts
While getting a self-employed mortgage in Canada can be more complex, it’s far from impossible. By preparing the right documents and working with an experienced mortgage professional, you can navigate the process smoothly.
Need help securing a mortgage as a self-employed borrower? Mortgage With Abhishek specializes in helping entrepreneurs and freelancers get the financing they need. Contact us today to explore your options!
Author
Abhishek Gopinath is a trusted Ontario-based mortgage broker specializing in alternative mortgage solutions for self-employed professionals, real estate investors, and borrowers with unique financial needs.
