Suppose you are self-employed and having trouble getting a mortgage. In that case, it may be because your accountant suggested you write off as many expenses as possible to reduce your personal income taxes. This means that you will get a tax break for this purchase, but it may be more difficult to be approved for a mortgage.

As an entrepreneur, you have to balance many different trade-offs when it comes to your taxes. One of the major considerations is how you can qualify for the mortgage you need. In this article, we’ll cover the first major considerations you need to take into account to ensure you succeed with your mortgage.

Determine How Much Mortgage You Can Afford Today

Banks are primarily interested in two things when it comes to businesses: 1) the amount of money the business is making now and 2) the amount of money the business is expected to make in the future. If your business doesn’t have a strong track record of making money, or if it doesn’t have a clear path to making more money in the future, the bank is likely to be uninterested in lending to your business.

That said, if you want to know how much you qualify for today, look no further than our tips below.

• To calculate your tax payable, take the average of your reported income from Line 150 of your personal income taxes for this year and last year. For example, if your reported income is $175,000, your tax payable would be $17,500.

• If you want to determine how much mortgage you can qualify for, a simple rule of thumb is multiplying your declared income by 5. This will give you an estimate of the maximum amount a lender would be willing to give you. In this example, if you have an income of $875,000, you could qualify for a mortgage of up to $4,375,000.

• If you want to purchase a home that will cost less than $875,000, it is important to remember that you will need to write off your income to pay fewer taxes. However, be careful not to overshoot this amount, as you will then be stuck with a smaller mortgage than you actually need.

How Much Do I Declare in Taxes as a Self-Employed Person?

In general, you will want to declare any income you made in the last calendar year and any deductions or business expenses you incurred. This includes things like office supplies, travel expenses, and any other costs associated with running your business. You will also need to file any relevant paperwork with the government, such as your business license and any permits you may have.

If you’re worried that your income from last year won’t meet the requirements for a mortgage, don’t fret! You may be able to submit your tax return from two years ago instead, which could raise your average income and help you qualify. However, this opportunity is only available for a limited time, so act fast!

Conclusion

Indeed, getting the right self-employed mortgage in Canada can be a daunting task. However, by doing your research and understanding the process, you can increase your chances of being approved for a mortgage. Speak to a mortgage broker to learn more about the different options available to you.
If you are hoping to acquire a self-employed approval in Ottawa, look no further than our options here at Mills Financial Group. We are part of TMG The Mortgage Group – an award-winning Canadian mortgage brokerage with a national team of over 800 qualified and accredited mortgage brokers, agents and associates providing residential and commercial mortgage services. Call us today, and let us discuss your most viable mortgage options.