Self-Employed Mortgage in Quebec: Documents, Income and Lenders

Self-employed borrowers can get a mortgage at the same rates as salaried employees, as long as they can prove stable income, usually over 2 years, with their notices of assessment. The challenge: lenders look at your declared net income, often far below your revenue. If your declared income is low, specialized lenders exist, and that’s where a broker makes the difference.

Why it’s more complex for self-employed borrowers

For an employee, an employment letter and a pay stub are enough. For self-employed borrowers, the lender has to assess a business’s stability. And the more expenses you deduct to pay less tax, the lower your qualifying income.

Example: a consultant bills $120,000 a year, deducts $50,000 in expenses and declares $70,000 in net income. To a traditional lender, her income is $70,000, not $120,000.

Documents required

Self-employed, not incorporated

• Income tax returns (T1 General) for the last 2 years, with the business statement.
• Federal and Quebec notices of assessment for the last 2 years.
• Proof your taxes are paid (no balance owing to the CRA or Revenu Québec).
• Proof the business exists: registration with the Registraire des entreprises, GST and QST numbers.
• Bank statements for the down payment.

Self-employed, incorporated

• All the documents above for your personal income (salary and dividends).
• The corporation’s financial statements for the last 2 years.
• Articles of incorporation.

How lenders calculate your income

• 2-year average: most lenders average your net income over the last 2 years. If your income is dropping, they often use the lower year.
• Possible add-backs: some lenders add back depreciation (CCA) and part of home office expenses, since they aren’t actual cash outflows.
• Incorporated: some lenders consider the corporation’s retained earnings, in addition to your salary and dividends.

This is one of the areas where lenders differ most: the same file can produce a very different borrowing capacity from one lender to the next.

Your 3 options depending on your situation

An alternative mortgage isn’t permanent: after 1 or 2 years, once your declared income is stronger, you can often move back to a traditional lender.

6 tips to prepare your application

1. Plan 2 years ahead. If you’re thinking of buying, talk to your accountant: declaring a bit more income for 2 years can significantly increase your borrowing capacity.
2. Pay your taxes on time. A balance owing to the CRA or Revenu Québec can block a file.
3. Separate your finances. A separate business bank account makes your file clearer.
4. Keep your credit spotless. For self-employed borrowers, credit carries even more weight.
5. Build a larger down payment if possible: it opens up more options.
6. Work with a broker who knows the lenders open to self-employed borrowers, instead of applying at bank after bank.

Frequently asked questions

Self-employed? Let’s talk about your file

I regularly help self-employed workers and business owners get their mortgage, and I know which lenders give the most weight to your income. See our self-employed mortgage service or start your free pre-qualification.