How Lenders Average Variable Income
Most lenders will average your income over the past two years, using tax documents like your Notice of Assessment and T4 or T1 General as verification. This means a strong recent year cannot fully offset a weaker prior year in most standard calculations, so consistency over time matters.
Documentation to Gather Early
Commission earners should be ready to provide two years of tax returns, Notices of Assessment, and often a letter from their employer confirming the commission structure. Self-employed applicants may need additional documents like business financial statements or industry specific proof of income.
- Two years of tax returns
- Notices of Assessment
- Employer letter on commission structure
Why a Strong Recent Year Still Helps
While averaging is standard, showing a clear upward trend in your income can help your case with some lenders, especially if you can demonstrate the growth is likely to continue rather than being a one-time spike. Discuss this trend with your broker to see which lenders weigh recent performance more favourably.
Down Payment Considerations
Variable income earners sometimes benefit from a larger down payment, since it can offset some lender concerns about income consistency and improve your overall approval odds. It also reduces your monthly payment, which helps your debt ratios regardless of income type.
Working With a Broker Instead of One Bank
Different lenders have different appetites for variable income, and some specialize in working with commission based professionals like real estate agents or salespeople. A broker can match you with a lender whose guidelines fit your specific income pattern rather than assuming one bank's rules apply everywhere.
Frequently asked questions
- How many years of income history do lenders typically require for commission earners?
- Most want to see at least two years of consistent income history, often averaged together, though specific requirements vary between lenders.
- Can a large down payment make up for inconsistent income?
- It can help improve your overall application strength, though lenders will still want to verify your income meets their documentation requirements.
- Is it harder to get approved as a commission based worker compared to a salaried employee?
- It typically requires more documentation, but plenty of lenders are comfortable with commission income when it is properly verified and shows reasonable consistency.