It’s no secret that everybody wants to have a home. For this reason, people take out a home loan to help finance it. In a place like Canada, home loans are always hot and highly sought after. Conversely, people also have many choices. For self-employed people, they have a self-employed home loan.

A self-employed home loan is precisely what it sounds like: a home loan tailored towards self-employed people such as business owners and freelancers. It’s a good alternative for those who can’t afford to go for the conventional home loan (i.e. the bank would deny their loan application). Moreover, bank loans are only for people who already have a job or a steady income. However, not many people are aware of it, so we’ll talk about it in this article. Read on below to get started.

More about Self-Employed Home Loans

Self-employed home loans are for those who primarily rely on self-employed income rather than employment income. Unlike conventional home loans, self-employed home loans are also offered by non-bank lenders because banks are very strict about self-employed people and their approval for home loans. As a result, it’s not that hard for a self-employed person to get a home loan from a non-bank lender such as a credit union or a building society.

Qualifications for a Self-Employed Home Loan

Like any other type of loan, even self-employed home loans come with the requirements to qualify for one. These include:

Income Verification

Since the bank can’t track your income, you must be able to provide them with your income verification. You can either show them your cash flow or your latest tax return. For example, if you’re a business owner and you have a business bank statement, it’s more than enough to get you qualified.

Mortgage Loan Amount

The amount you’ll be able to get depends on your income and how much you can afford to pay for your mortgage. However, non-bank lenders give you a wide range of how much you can borrow. Usually, it ranges from a minimum of $40,000 to a maximum of $1.5 million.

Minimum Down Payment

Many banks also require a minimum down payment, which is 5%. However, non-bank lenders only need as little as 1% of your property value. This is one of the reasons why self-employed home loans are a good alternative.

CMHC Self-Employed Mortgage Insurance

As a self-employed person, you’ll have to obtain mortgage insurance from the Canada Mortgage and Housing Corporation (CMHC). However, as it’s a government program, CMHC will also require you to have some kind of income verification. This can be issued by a CRA or by your employer. In addition, you’ll also have to pay a premium for the mortgage insurance.

The Benefits of Self-Employed Home Loans

When you take out a self-employed home loan, you’ll reap the following benefits:

Better Loan Rates

Self-employed home loans are designed for self-employed people. These loans don’t have the same strict underwriting standards as the bank’s home loans. Thus, it’s easier to get approved without proving your regular income, and you’ll be offered better loan interest rates.

Qualification for a Higher Loan Amount

You’re also given a higher loan amount than the conventional home loan as a self-employed person. You can borrow up to $1.5 million because the bank doesn’t have to rely on your income to determine your ability to repay the loan, but rather, it’s based on your business income.

Efficient Approval Process

When you take out a self-employed home loan, you’ll have an easier time getting approved for the loan because the bank doesn’t have to verify your assets and liabilities like your employment income. All they require is proof that you’re self-employed.

Save Money on Taxes

When you take out a home loan, you’ll have to pay taxes. However, when you take out a self-employed home loan, you’re exempt from paying taxes on the interest you paid, saving you some money.

Conclusion

A self-employed home loan is created explicitly for self-employed people. If you depend primarily on self-employed income, this could be the perfect loan for you. The loan is offered by non-bank lenders and benefits from a better interest rate and a high loan amount, among others.

If you’re looking for providers of secured home loans in Ontario, Mills Financial Group has got you covered! We offer comprehensive loan programs to help you be one step closer to your dream home, with affordable rates and reasonable terms. Reach out today and allow us to help you!