Self-employed? New rules help prospective homeowners

Beginning October 2018, Canada’s self-employed may find it easier to secure a mortgage, thanks to changes from Canada Mortgage and Housing Corp. (CMHC) aimed at giving lenders more guidance and flexibility to help this important homebuying demographic.

Self-employed Canadians are key contributors to strong and vibrant communities and make up about 15 per cent of Canada’s population. However, they may have had difficulty qualifying for a mortgage as their incomes may vary or be less predictable.

In line with the National Housing Strategy’s mission to address the housing needs of all Canadians, the changes include:

  • Providing examples of factors that can be used to support the lender’s decision to lend to self-employed borrowers who have been operating their business for less than 24 months, or in the same line of work for less than 24 months. These factors could include acquiring an established business, sufficient cash reserves, predictable earnings, and previous training and education.
  • Providing a broader range of documentation options to increase flexibility for satisfying income and employment requirements when qualifying self-employed borrowers to support an “add back” approach for grossing up income for sole proprietorship and partnerships. This documentation could include the Notice of Assessment (NOA) accompanied by the T1 General, the CRA Proof of Income Statement and the Statement of Business or Professional Activities (T2125).

“Self-employed Canadians represent a significant part of the Canadian workforce,” says Romy Bowers, chief commercial officer, CMHC. “These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.”

These enhancements, which apply to both transactional and portfolio insurance, will take effect Oct. 1, 2018.

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