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Legal Matters: Self-employed and seeking a mortgage

Real estate lawyer Jeffrey Cowan advises a self-employed professional seeking financing for a condo.

Taking advantage of write-offs causes your income to appear lower, making a mortgage harder to secure.

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Taking advantage of write-offs causes your income to appear lower, making a mortgage harder to secure.

I am a self-employed professional with an office on the ground floor of my home which my business rents from me. I am purchasing a condo and although my wife makes a very good salary from her job in marketing, we are having difficulty qualifying for a mortgage because my self-declared employment income is lower than the average salary of someone in Canada. Is there a way to avoid this problem?

The problem with self-employed individuals is that they often have lower income due to legal but not necessarily straight-forward write-offs.

Chartered banks like to see simple T4s that they can assess very easily and give their fairly quick consent to a mortgage. There are secondary lenders who will consider self-employment income and it is generally to these lenders that self-employed people looking for mortgages have to turn to. Typically, the interest rate is higher with these lenders because they see self-employed people as higher risk.

This is somewhat ironic considering that when a person who works for a large company is let go, they may spend months looking for a new position while self-employed people are generally much more self-reliant and, obviously, less likely to be unemployed.

Jeffrey Cowan is a real estate lawyer and can be reached at jeff@cowanlaw.ca.

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