Using Business Income / Corporate Income to Qualify for a Mortgage in Canada, 2024

Are you self- employed and thinking about, or hopping to use your own business income or corporate income to help you qualify for a mortgage?

It is possible, but not very common, as it usually does not help as much as we hope it would.

Mortgage Mark Herman, best Calgary Alberta mortgage broker for self-employed buyers

 

For RESIDENTIAL Purposes:

Very few lenders (like 3 out of 40+) will consider using business income that is not on personal taxes.

• When they will allow the business income added in, they only use between 40-60% of the net business income after dividends paid.
• They wouldn’t allow the operating company to actually be on mortgage/title;
  • it would be in personal name or
  • Hold Co name (with full personal guarantee, for the full mortgage amount – with full recourse. Meaning they can/ do/ will sue you into bankruptcy if they need to foreclose.)

Docs Needed

They do need to review more data than usual if trying to use business financials. I addition to the regular documents needed (2 years of T1 Generals, and NOAs and T4’s if there is T4 income), add in these docs:

For the Business:

• 2 years of professional accountant prepared financial statements
  • including a signed ‘Notice to Reader’ and
• Need a compilation of all billing engagements for the fiscal periods

 

Catch – there are always a few:

If the property in question has a large shop – it is usually not allowed in determining the value so a higher mortgage amount is usually required.

They also have a hard time if there is any income to be derived from the property.

 

Acreage Details

Max land is limited to 4, 8, or 10 acres – depending on lender

• Only the home, de/attached garage and 4 acres are used for valuation by lender.
• NO value is attributed to: out-buildings, sheds, riding rings, stables, storage, nor fences
  • Many of which could be valued at 200k+, like fences and buildings.