According to CMHC (Canadian Mortgage and Housing Corporation) about 15% of Canada’s population are self-employed. One of the more important documents that they will have to include in a mortgage application, will be the Statement of Business Activities. These individuals may have difficulty qualifying for a mortgage because their incomes may vary or be less predictable.
In July of this year, CMHC unveiled changes that are aimed to giving lenders more guidance and flexibility when it comes to self-employed borrowers. In the changes CMHC said several factors could be used in future to support a lender’s decision to give a mortgage to self-employed borrowers, who have been operating their business for less than two years, or have been in the same line of work, for less than two years.
These factors could include things such as:
- Acquisition of an established business
- Sufficient cash reserves
- Predictable earnings
- Previous training and education
They also said that previously, those types of applications could be accepted, providing that a ‘solid rationale’ was noted in the lender’s loan file.
The housing agency also laid out a broader range of document options that could be used to satisfy income and employment requirements to qualify self-employed borrowers for a loan.
When the changes take effect on October 01, 2018 those documents needed, will include such documents as, a Notice of Assessment, accompanied by a T1 General tax form, a Proof of Income Statement from the Canada Revenue Agency and a Form T2125, which is a Statement of Business or Professional Activities.
The question that some of you would have is – What is a Statement of Business Activities?
The Statement of Business Activities, is used to calculate business income or income from self-employment. You use it if you’re a sole proprietor or are in business partnership and can calculate your gross and net income, after deducting business expenses. If you’re self-employed and control the time, place and hours you work, supply your own equipment and tools, make a profit or incur a loss and cover all the business costs, the T2125 will be used to report income and expenses.
Our knowledgeable Mortgage brokers have a combined industry knowledge of over 18 years, so please do not hesitate to contact us when you’re self-employed and are thinking of purchasing a home.
Original article: www.cbc.ca/news
