A mortgage that gives the self employed credit for great credit.
A large and growing segment of Canadians are taking advantage of flexible or unconventional employment opportunities. In fact, the self-employed now represent close to 16% of the country’s workforce. Today’s generation of contractors, freelancers, consultants, commission sales professionals and small business owners have come to value independence in their day-to-day work. Now, that entrepreneurship is no longer penalized when it comes to mortgage financing.
For many it was an embarrassingly familiar story. They enjoyed a successful professional life, but when they applied for a mortgage, they found themselves on the defensive – trying to prove to a lender that they actually earned enough income to service the mortgage they wanted, with many turned down because their income just didn’t measure up.
Hard to believe, but true. If you work independently or own a business yourself, then you know that it pays to keep your taxable income as low as possible. That makes you a smart business person. But the story can change when you try to get a mortgage. Your income – at least on paper – may not support the mortgage payments, and you could be penalized for smart income management.
For Canadian homebuyers stuck on the income obstacle, the latest mortgage news on the street will come as a delightful shock. The newest mortgage does the unthinkable: it doesn’t require you to show your income records. In fact, there is no income declaration, no Notice of Assessment, and no confirmation of business ownership. It doesn’t even include your income as a factor in qualifying you for your mortgage.
“It can’t be true”, you’re thinking, or there must be some hitch. In fact, it’s both good sense and good business. Innovative lenders had already begun to recognize that your T4 may not tell the whole story, as a myriad of stated-income mortgages have been launched over the last few years. But this concept of not including any income figure at all is an idea that’s long overdue.
So how does the lender assess whether you’re a good credit risk? They look at your credit history. If you have consistently paid your bills and your loans then you’ve demonstrated the kind of financial responsibility that suggests you can manage your mortgage. You’ve taken on debt that you said you could manage, and you’ve kept your word with your lenders. That’s the record your mortgage lender will rely on, although they will also verify your employment and assess the loan amount based on your field of work. The new mortgage option may be the best news for entrepreneurs this year. Now, they can get a quick and easy mortgage.
As mortgage professionals, we’re pleased to see that lenders have noticed that the traditional lending criteria was leaving many Canadians out in the cold. And we’re absolutely delighted that the most innovative lenders have begun to address some of these gaps with some great new options.
With this latest mortgage option, entrepreneurship and prudent income management are no longer a liability when it’s time to buy a home. It’s an exciting time to be buying a home – with more options than ever before.
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