Getting a mortgage when you're self-employed is harder than for salaried employees—but it's absolutely achievable. This guide covers everything self-employed Canadians need to know to get approved in 2026.
Why Self-Employed Mortgages Are Different
The Core Challenge
Lenders verify income from T4 slips for employees. For self-employed borrowers, income verification is more complex:
- Business income fluctuates year to year
- Tax optimization often reduces declared income
- Business expenses lower net income on tax returns
- Multiple income streams complicate the picture
What Lenders See vs. Reality
| Situation | Tax Return Shows | Actual Cash Flow |
|---|---|---|
| New business owner | $40,000 | $120,000 |
| Established contractor | $80,000 | $150,000 |
| Business with depreciation | $60,000 | $110,000 |
The gap between tax-optimized income and actual earnings is why self-employed mortgages require specialized approaches.
Types of Self-Employment
Your business structure affects mortgage qualification:
| Structure | Income Verification | Complexity |
|---|---|---|
| Sole proprietor | T1 General, Statement of Business Activities | Medium |
| Partnership | Partnership T5013, T1 General | Medium-High |
| Corporation | T2 Corporate return + T1 personal | High |
| Multiple businesses | All applicable returns | Highest |
Get Pre-Approved as a Self-Employed Borrower
Work with our team—we specialize in self-employed mortgages and know which lenders look beyond traditional documentation.
Documentation Requirements
Standard Self-Employed Documents
Minimum 2 years in business:
| Document | Purpose | Years Needed |
|---|---|---|
| T1 Generals (personal tax) | Verify declared income | 2 years |
| Notices of Assessment (NOA) | Confirm tax returns filed | 2 years |
| Business financial statements | Show business health | 2 years |
| Business license | Prove ongoing business | Current |
| GST/HST returns | Verify business revenue | 2 years |
For incorporated businesses, add:
- T2 Corporate tax returns
- Articles of incorporation
- Corporate financial statements
Bank Statement Programs
Some lenders offer "stated income" or bank statement programs:
- Review 12-24 months of business bank statements
- Calculate average deposits as income proxy
- Higher rates than traditional verification
- Lower LTV limits (typically 75% max)
Qualification Methods
Method 1: Traditional Income Verification
How it works: Average your declared net income from 2 years of tax returns.
Calculation: (Year 1 net + Year 2 net) ÷ 2 = Qualifying income
Example:
- 2023 net income: $70,000
- 2024 net income: $90,000
- Qualifying income: $80,000
Best for: Those with growing, consistent declared income
Method 2: Add-Back Approach
Some lenders add back certain business expenses:
| Expense Type | Add-Back Allowed? | Notes |
|---|---|---|
| CCA (depreciation) | Often yes | Non-cash expense |
| Business use of home | Sometimes | Portion may be added |
| Meals & entertainment | Sometimes | 50% already non-deductible |
| Vehicle expenses | Sometimes | Personal use portion |
Example:
- Net income: $80,000
- CCA add-back: $15,000
- Qualifying income: $95,000
Method 3: Gross Revenue Consideration
Some B lenders look at gross revenue with expense ratios:
Example:
- Gross revenue: $400,000
- Industry expense ratio: 70%
- Imputed net income: $120,000
Lender Options for Self-Employed
| Lender Type | Income Approach | Rate Premium | Best For |
|---|---|---|---|
| A lenders (banks) | Strict verification | None | Strong docs, 2+ years |
| Credit unions | Some flexibility | 0-0.25% | Good docs, local focus |
| Monoline lenders | More add-backs | 0-0.25% | Growing businesses |
| B lenders | Stated income | 0.5-2% | Low declared income |
| Private lenders | Equity-based | 2-5%+ | New business, bruised credit |
Down Payment Requirements
Self-employed borrowers may face higher down payment requirements:
| Program Type | Minimum Down | Notes |
|---|---|---|
| Traditional A lender | 5-10% | Full income verification |
| Stated income B lender | 20-25% | Non-traditional verification |
| Private lender | 25-35% | Equity-focused |
Strategies to Improve Approval Odds
1. Increase Declared Income
Consider the mortgage cost of low declared income:
| Declared Income | Max Mortgage (approx) |
|---|---|
| $60,000 | $280,000 |
| $80,000 | $375,000 |
| $100,000 | $470,000 |
| $120,000 | $560,000 |
Trade-off calculation: The tax cost of declaring more income vs. mortgage qualification benefit.
2. Build Business History
- 2+ years in same business improves options significantly
- 3+ years opens even more doors
- Consistent or growing revenue helps
3. Maintain Strong Credit
- 680+ score essential for A lenders
- 720+ opens best rates
- Pay all bills on time
- Keep credit utilization low
4. Save Larger Down Payment
- 20%+ eliminates CMHC requirements
- Reduces rate premiums for B lender options
- Demonstrates financial discipline
FAQ
Q: How long do I need to be self-employed?
A: Most A lenders require 2 years minimum. Some B lenders work with 1 year of history. Under 1 year typically requires private lending.
Q: Can I use a co-signer to help qualify?
A: Yes—a co-signer with strong T4 income can help bridge the qualification gap.
Q: Does my corporation's retained earnings help?
A: Some lenders consider retained earnings as evidence of earning capacity, but it doesn't typically add to qualifying income directly.
Q: I pay myself dividends—how does that work?
A: Dividend income is included, but T5 slips and consistency matter. Lenders want to see predictable dividend payments.
Q: What if my income decreased last year?
A: Income trending is important. Decreasing income may limit you to the lower year's figure or require explanation of circumstances.
What's Next
Self-employed mortgages require the right lender match. Connect with our team—we specialize in self-employed financing and work with lenders who understand business owners.
Ready to Get Started?
Contact us today for personalized mortgage advice and competitive rates.
