Looking for Self-Employed Mortgage Options in Ontario?

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If you’re self-employed in Canada and thinking about buying a home or refinancing, you’ve probably already heard that getting a mortgage can be harder for business owners, freelancers, and contractors.

And it's true—qualifying for a mortgage when you're self-employed does come with extra hoops to jump through. But the good news is: it’s definitely possible, and millions of self-employed Canadians get mortgages every year. The key is knowing how lenders look at your income—and why working with a mortgage broker can make the process a whole lot easier.

Why Self-Employed Mortgages Are More Difficult

When you’re a full-time employee, it’s pretty simple. Lenders look at your pay stubs, job letter, and maybe a few recent tax returns. Your income is predictable and easy to verify.

But when you’re self-employed, things get more complicated:

Your income might go up and down from year to year

You probably write off a lot of business expenses

Your tax return might show less net income than you actually earn

You may not have traditional pay stubs or a regular salary

All of this makes it harder for major banks to assess how much mortgage you can afford—because they rely heavily on tax-reported income.

Applying With Major Banks If You're Self-Employed

If you’re applying with a major bank (known as an A lender), they’ll usually want to see:

Your last 2 years of tax returns (T1 Generals)

Notices of Assessment from the CRA to confirm no taxes are owed

Financial statements if you're incorporated

Business license or articles of incorporation (if applicable)

They average your net income (after deductions) over the past two years to figure out what you qualify for.

The problem?

Most self-employed people write off a lot of expenses to lower their tax bill. That’s smart for tax planning—but not so helpful when you’re applying for a mortgage.

If your actual earnings are, say, $100,000 per year, but your tax returns only show $45,000 after write-offs, that $45,000 is the number the bank will use to calculate your mortgage amount.

It can feel frustrating—because you know you’re earning more than what the numbers on your taxes suggest.

On top of that, major banks have strict debt ratios:

GDS (Gross Debt Service): max 39%

TDS (Total Debt Service): max 44%

These limits cap how much of your income can go toward housing and total debt payments. So if your tax-reported income is low, you’ll hit those limits fast.

What Are GDS and TDS Ratios?

Let’s quickly explain what those mean.

GDS is the percentage of your income that goes toward housing costs (mortgage, property taxes, heating, and condo fees if applicable).

TDS includes everything in your GDS, plus other debt payments like car loans, credit cards, or lines of credit.

Lenders use these ratios to assess whether you can comfortably afford your mortgage payments.

Here’s a quick example:

If you earn $60,000 per year (based on what your tax return says):

GDS at 39% = $1,950/month allowed for housing costs

TDS at 44% = $2,200/month allowed for housing + all debts

If your income on paper is lower than reality, your buying power will shrink.

Use a Mortgage Broker If You Are Self-Employed

Here’s where things get a lot better: working with a mortgage broker can completely change your options.

A good broker doesn’t just send you to the big banks. They also work with alternative lenders (also called B lenders or subprime lenders) who specialize in self-employed clients, gig workers, and business owners with non-traditional income.

Instead of focusing only on tax documents, many of these lenders offer a “stated income” program, where they assess your income based on other documents like:

Business bank statements

Client invoices or contracts

HST filings

Proof of consistent cash flow

These programs are designed specifically for people like you—who have solid income but don’t show it all on their tax returns.

Why B Lenders Are Better If You're Self-Employed

B lenders are more flexible in how they qualify self-employed borrowers. They understand that business owners often reduce their tax bills through deductions, but still have strong income and good credit.

Here’s what they usually ask for:

6 to 12 months of business bank statements showing regular income deposits

Invoices or contracts with clients to support your income claims

Credit score (550+ is usually enough)

Down payment (at least 20% in most cases)

They also allow higher GDS and TDS ratios:

Up to 50% for both GDS and TDS

That gives you more room to qualify for a larger mortgage, even if your income on paper is lower.

For example, if your real income is closer to $100,000 but your tax return says $50,000, a B lender might still approve you based on your cash flow and documents—whereas a big bank likely wouldn’t.

Why Use a Mortgage Broker Instead of a Bank?

A broker works for you, not the bank. Their job is to shop around on your behalf and find the lender who will give you the best shot at approval, based on your real situation—not just your tax filings.

Here’s why that matters:

They know which lenders accept bank statements or contracts

They can present your case to multiple lenders at once

They’ll guide you through the documentation process

They can save you from applying blindly and getting declined

And best of all? In most cases, you don’t pay the broker directly. They get paid by the lender once your mortgage is approved.

Pros and Cons of Working with a B Lender

If you're self-employed and not getting anywhere with the big banks, a B lender could be the key to finally getting approved. But like any financial product, there are trade-offs.

Pros:

Flexible income verification: You can use business bank statements, invoices, and contracts to show your income.

Higher debt ratio limits: With GDS and TDS caps at 50%, you can qualify for more, even if your income on paper is lower.

Lower credit score threshold: B lenders will work with borrowers with credit scores above 550.

More personalized underwriting: They look at your full financial picture, not just your tax returns.

Cons:

Higher interest rates: B lenders usually charge slightly higher rates (i.e. 1%) than major banks. If bank rates are 4.5%, you might pay 5.5%.

Larger down payment: You’ll often need at least 20% down, since B lenders don’t offer insured mortgages.

Lender or broker fees: In some cases, there may be a lender fee or broker fee (usually 1% of the mortgage amount), especially with more complex files.

Despite the higher rates and fees, many self-employed Canadians use B lenders as a stepping stone. Once you’ve built a stronger financial profile or paid down some debt, you can refinance into a lower-rate mortgage later.

How Much Down Payment is Needed for Purchases?

If you’re self-employed and qualifying with a major bank, the same rules apply as everyone else:

5% down for homes up to $500,000

10% on the portion between $500,000–$999,999

20% down for homes over $1 million or if you're buying a rental property

But if you're using a B lender or stated income program:

You’ll usually need a minimum of 20% down

Some lenders may ask for more depending on your credit score or income documentation

Getting a Mortgage If You Are Self-Employed

If you’re self-employed, getting a mortgage isn’t impossible—but it does require more prep and a different approach. Here’s how to make it easier:

Start early: Don’t wait until the last minute to gather your documents. It’s better to know your options in advance, even before house hunting.

Be honest and realistic: Don’t overstate your income or hide debts—lenders will check.

Work with a broker: They can open doors to lenders who specialize in self-employed files and help you navigate the process with less stress.

Plan ahead: If your taxes show low income this year, talk to your accountant about reporting more next year if you plan to apply for a mortgage.