June 2011
This article is provided by Brian Marling, Accredited Mortgage Professional, of Neighbourhood DLC – Canada’s #1 Mortgage Team 905.372.7222
Ahh…it’s a favourite daydream of working Canadians: to go into business for yourself! For some Canadians who are self-employed, their situation is the consequence of corporate downsizing. For others, it is a carefully planned decision to leverage their knowledge and experience for themselves and improve their own bottom line.
Typically a very innovative and energetic bunch, the self-employed now comprise approximately 18% of Canada’s total workforce. We like to imagine that these are the lucky folks who are living their entrepreneurial dreams. But talk to self-employed Canadians about getting a mortgage and many will tell you that the dream can have downsides.
These individuals – who may actually be more financially successful than ever – often do not fit traditional bank lending criteria. It can make mortgage shopping a frustrating and, for some, a humiliating experience. Without an established stream of pay stubs from an employer, lenders have none of the traditional assurances that you can meet your mortgage obligations. You may be expected to undergo a long and complicated process to prove your ability to service your debt.
Lenders want to verify your employment and your income – not a simple task for someone who is self-employed. Lenders are also looking ahead; they will want some evidence that payments can be made for the life of the mortgage – not just over the next year. Most frustrating of all, small business owners are usually expected to provide detailed financial statements for their business for the past two years. And what picture do those statements paint for the lenders? An astute business owner with a good accountant will work hard to minimize taxable income for the business: a smart financial management strategy. But when lenders plug those figures into their lending formulas – they may conclude that you are a high-risk borrower.
The problem is not with the self-employed as a category; it is with lenders’ traditional criteria, and their inability to reflect the different income environment of a self-employed homebuyer. Thankfully, the lending landscape has adapted to this market need. Certain lenders through the mortgage broker channels have designed mortgage products precisely for this very attractive market segment. Naturally, the lender will still need to assess risk, but the criteria are tailor made for the self-employed and essentially take a common sense approach to the definition of income.
You could qualify for your mortgage based solely on what you state your income to be, and after confirmation that your lending ratios, credit and tax liabilities are in good order it can be that quick, that easy! As more lenders enter this market niche, you’ll find that not all products are equal. As a group, the self employed often delegate to other professional service providers and this is a situation where you may want to seek advice from a professional mortgage consultant so you get the best mortgage for your needs. For the self-employed – who build their own success on understanding the needs of their customers – the new mortgages designed for them are good business. And they’re also welcome news to the growing number of Canadians who are building their own success in their own way. You don’t have to feel like a second class citizen any longer.
These are the kinds of things we discuss on a daily basis with our clients – hopefully before mistakes are made. As Mortgage Professionals we care about your entire financial picture and offer expert advise designed to help you become debt-free as soon as possible and on your way to creating real wealth.
Because Neighbourhood DLC is Canada’s Largest Mortgage Team, we can offer you the absolute best products, service, advice & pricing. Call me today, Brian Marling 905-372-7222 for a Personal & Private consultation.
Here at Neighbourhood not only do we provide Award Winning Service and the best selection of mortgage products in the country, but we also offer our Free Financial Fitness Seminars and have added Personal Financial Coaching for those who truly desire a change but would like some assistance along the way. If you don’t change something then don’t expect different results. As always you can call us anytime to discuss how we may be able to help you.
At Neighbourhood, & the home of the Brian Marling Mortgage Team, we are concerned for the total well-being of our clients. That’s why we are taking the years of experience from our award winning office and offering a series of FREE Seminars to our clients and their friends & families and to the public at large. The seminars, entitled ‘Financial Fitness’, will be offered free of charge and will cover all the secrets of successful personal financial freedom. If interested please call our office at 905.372.7222 to reserve your spot as seating will be limited.
SPECIAL NOTE: We have recently bought our own building and would love for you to drop by and say hi. Come see us at The Neighbourhood Professional Centre #9 James Street East in Cobourg – right off of Division Street.