Starting a new business? It could affect getting a mortgage

The Canadian government announced that on 1 October 2018, they will change regulations that impact the way self-employed Canadians qualify for a mortgage. This could be exciting news!

Did you know that 15% of Canadians are self-employed full time? Even more have small side businesses.

When it comes to mortgage financing, most self-employed people have difficulty accessing financing to buy a home, since their income sources may vary or be less predictable than that of employed borrowers. Traditionally, self-employed borrowers don’t look great on paper to lenders. While business owners can use expenses to invest in the business and lower taxes owed, people who are self-employed can end up with a very low verifiable income, which makes qualifying for a mortgage difficult.

5 changes outlined by CMHC

  1. Allowances for individuals who can”
    1. demonstrate sufficient cash reserves
    2. can expect predictable future earning
  2. What documentation can be used to qualify
  3. New guidelines for those people who
    1. Are acquiring new businesses
    2. Have recently moved from full time employment to self-employment (in the same field).

But we’ll have to see how these new regulations actually play out before getting too excited.

Before you make the jump into self-employment, you need a plan. That plan should include how you will qualify to either purchase a home or renew/refinance your existing mortgage.

From experience, a little planning ahead of time can make all the difference in the world. Get in touch, and we’ll walk through your options.

Also, if you’re gainfully employed now with equity in your property, it might make sense to look at options to refinance before you move towards self-employment, as you might have more options available now compared to the future. It might be less expensive than you think to access the required capital to invest in your own business.

Feel free to get in touch anytime!

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