All You Need To Know About Mortgages For Self-Employed Individuals
If you are self-employed and want a mortgage you would need to know the fine print to get through the process in a hassle-free manner. Tax returns An individual is considered self-employed in Canada if they can show tax returns for two years. This is a requirement by most lenders. Tax returns are a kind of proof of income and the lenders can know the flow of income of the borrower and judge whether they are in the position to make mortgage payments every month. Interest Rates
Just like a variety of mortgages, rates of interest and event terms will differ from one lender to another for mortgages for the self-employed. But in general interest rates are high for this category and can go up to a whopping 5 percent - though things such as mortgage term and kind of loan would be factored in. Unlike the conventional mortgage where the lender fee is covered by the institution, the self-employed borrowers have to pay a premium. Qualification for self-employed mortgages As mentioned earlier self-employed mortgage borrowers will have to show their tax returns for two years which translates to consistent income. Besides, they will also have to submit their business license and business employer information. What do you require for self-employed mortgages? When we speak of two-year income tax returns, the borrowers of this category need to show all that they earn from their current business. They also have to offer any other source of income they may have - like a job or another small and budding business. All this is required so that the lenders can assess if the borrower will be able to pay his dues toward the mortgages. Structures of self-employed mortgages
Those who are self-employed and want a mortgage have two options in Canada. They can either go for a fixed-rate mortgage or a variable-rate one. Most self-employed individuals lean towards a variable-rate mortgage as the income they generate is usually modest. This is so because the interest rates of variable-rate mortgages are usually low compared to those of fixed-rate mortgages. The key difference between both these types of mortgages is that in fixed-rate mortgages as implied the interest rate remains the same throughout the life and span of the mortgage while in variable-rate mortgages this can change, impacting the monthly payments of the borrower. On the other hand, variable rate mortgages come with an added advantage that the borrower has to pay just the interest every month.
If you are new to Canada or new to the business as a self-employed individual and are looking for a mortgage as a self-employed individual or entity, or have any questions or doubts regarding the same, do not hesitate to contact us at LendX Financial in Brampton, Greater Toronto Area.