For the self-employed, the path to home ownership may seem onerous and challenging. But preparation, the help of Equitable Bank with a knowledgeable mortgage broker, and perseverance can clear the way. Equitable Bank offers both prime and alternative mortgage lending solutions that support the needs of those who may not always have a stable income.

According to Statistics Canada, 2.8 million Canadians — nearly 15% of the labour force— were self-employed at the end of 2017. About half a million Canadians enter the ranks of the self-employed every year. But, pinpointing a precise number can be a challenge because the definition of self-employed can be vague. Self-employed people might be running their own businesses, have professional careers, freelance, be on commission, run their own farms, or have other entrepreneurial vocations of various kinds.

Since 2014, the Office of the Superintendent of Financial Institutions (OSFI) - the country’s banking regulator - requires federally regulated banks to look more closely at self-employed income earners than salaried workers before approving a mortgage application. As the number of self-employed individuals grows, the regulators and lenders, including Equitable Bank, are trying to figure out how to make it easier for them to obtain a mortgage.

A stable income is usually easy to prove if you work for an employer that pays you a salary. As an employee earning a salary you can show your T4 slips and a few recent pay stubs. If you don’t have an employer, you may not get a T4 slip, making it harder to verify how much you earn and whether or not that income is sustainable.

Self-employed workers typically obtain their mortgage through proof of self-employment, a Notice of Assessment and income statements from a verified source, such as their business bank account statements. They have to back it up with extensive documentation, which can be onerous when you are your own boss.

New Changes Coming

As of October 1, 2018, the Canada Mortgage and Housing Corporation (CMHC) started easing qualification criteria for insured self-employed borrowers to reduce this rigidity. CMHC says it will now consider more factors in the lending decision -- acquiring an established business rather than founding a brand-new start-up, having sufficient cash reserves, predictable earnings, previous training and education, and a demonstrated history of managing credit. In addition to T4s, recent account statements, business documentation and signed contracts will also be acceptable as proof of income.

“With our customized options and alternative solutions, Equitable Bank has always been more understanding of the needs of the self-employed. Now CMHC is following suit. Unincorporated business owners, especially the newly self-employed, may not typically have all that documentation,” says Joe Flor, Director, National Sales at Equitable Bank. “These enhancements will give us the opportunity to offer the self-employed more borrowing solutions.”