Securing a mortgage as self-employed will get easier

Canadian Mortgage App team • August 30 2018

With last years introduction of the Stress Test, it may have seemed virtually impossible to secure a mortgage as a self-employed buyer. Proving that you're a suitable borrower when your income varies unpredictably is challenging and ultimately, could hinder lenders from approving the loan.

As of October 1st, 2018 it’s about to become a little bit lenient. Canada Mortgage and Housing Corporation (CMHC) unveiled on July 19th that they would willingly provide lenders extra guidance and flexibility when it comes to self-employed borrowers; Which is in line with the National Housing Strategy’s mission to proactively address the housing needs all across Canada.   

CMHC is implementing examples of circumstances that can be used to support the lender’s judgment to accommodate borrowers; who have been operating their businesses for less than two years or in the similar line of work for less than 24 months. Furthermore, CMHC stated they would provide a comprehensive scope of documentation alternatives to enhance flexibility for satisfying income and employment requirements. Which pertain to both transactional, portfolio insurance and mortgage insurance for buyers who have put down a down payment of 20% or less.

“These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation.

This pliability is indeed a significant first step towards making it easier for Canada's self-employed workforce as they represent a considerable part of our growing economy. Self-employment sector increased by +4,500 in the second quarter of 2018, that's a 0.4% growth according to the Ontario Employment Report. We hope Genworth and Canada Guarantee will soon follow CMHC and make modifications to their conditions as 2019 approaches.