The self employed income problem
Banks typically base approval on line 15000 of your tax return, averaged over two years. If your accountant has done a good job minimizing taxable income, that number can look far smaller than what actually lands in your bank account each month, leading to declines or reduced loan amounts.
Stated income and alternative documentation
Private and alternative lenders can consider bank statements, business financials, contracts and gross revenue instead of relying solely on net income after deductions. This gives a more accurate picture of a self employed borrower's real capacity to pay a mortgage.
- Business bank statements
- Contracts or invoices
- Gross revenue trends
Using it as a bridge
Many self employed borrowers use a private mortgage for a year or two while restructuring how income is reported, working with an accountant to show higher taxable income before applying for a conventional refinance at better terms.
Costs versus flexibility
Private mortgages for self employed borrowers cost more than a standard bank product, but the flexibility around income verification often makes the difference between buying the home you want now versus waiting years to requalify under strict bank rules.
Frequently asked questions
- Can I qualify for a private mortgage with only one year of business history?
- It is possible depending on the lender and how strong your bank statements and contracts look, though two years of history generally makes approval easier.
- Do private lenders require a full appraisal for self employed borrowers?
- Yes, most require an appraisal to confirm property value since that is central to their lending decision.
- Is stated income financing legal in Ontario?
- Yes, stated income financing through private and alternative lenders is legal, though it requires disclosure and reasonable supporting documents rather than fabricated numbers.