Looking for Toronto self-employed mortgage advice

January 5, 2007 9:47 AM

My partner and I are thinking about buying our first home in Toronto and are looking into mortgage options, but it gets a little complicated as I'm self-employed. Looking for advice on self employed mortgages or good brokers in Toronto.

Between us we made about $60k each in 2006, and expect similar in 2007 and onwards. The complication comes in the fact that I'm a self-employed web developer, I left my permanent government job in January 2006 so I'm just approaching one year self-employed and expect to remain that way. My partner has a steady, professional job in healthcare.

From mortgage calculators, it looks like with our relatively low debt ($10k of student loans) and incomes we could expect to borrow around $400k from a bank *if* we were both employed.

We don't actually need that much, we're looking at condos around the $250-280k mark and expect to have a 10% down payment.

So, my specific question is regarding Canadian self-employed mefites mortgage experiences. I've googled up plenty of self-employed mortgages, but all seem to want you to have been self-employed for 3 years+, and we're not up for waiting another two years to meet that criteria. Anyone know good alternatives to this? Any advice on good, trustworthy mortgage advice in Toronto would also be appreciated.

posted by pasd to work & money (10 comments total)

I wouldn't worry. Here's what you do:

--get as large a downpayment as you can. 25% would be ideal.
--emphasize your partner's job. List the partner first. Your income is just gravy.
--Provide tax returns and such showing that you really do make $X per year and report it to the government.

I don't think you should have any trouble. Don't accept a mortgage at any inflated "self-employed high-risk" interest rates. What you want is to go the extra mile to make the bank comfortable lending to you at regular-risk rates. You do that by putting up a substantial downpayment, and otherwise emphasizing your ability to repay. If a given bank absolutely can't loan to you at regular rates, find another bank. It is perfectly legit to apply to several banks and play them off against each other. Many banks won't offer their best rates initially (annoying!).

Citizens Bank has the best mortgage rates in town, to the best of my knowledge.
posted by jellicle at 10:13 AM on January 5, 2007

As jellicle said, I think you should just apply for a real mortgage. If your income is stable I don't think it should be a real issue. If your partners income is high enough he can get a mortgage without you, then that is another option. You can pay back faster using your bonus income.

Also, how did you determine you could borrow 400K? That number sounds awfully high for a joint income of 60K. My guess is banks will lend you something closer to 250K, if that.
posted by chunking express at 11:07 AM on January 5, 2007

I'd recommend going for as big a down payment as you can get, and yes, emphasize the steady source of income. My husband and I were both self-employed when we easily qualified for our mortgage, and we were told that we could have gotten double the amount easily. If necessary, one of us can carry the mortgage on our own.

Do you have RSP funds you can raid for a larger down payment? You can withdraw up to 20K each for your first home, and you have 10 years to pay it back. See the Home Buyers' Plan.
posted by maudlin at 11:30 AM on January 5, 2007

There are lots of options out there, way more than you'll find described on the web. Talk to a good mortgage broker. That way you start with your situation and find the mortgages that you can get, rather than starting with the mortgage and seeing whether you fit it.

I am self-employed (my wife is not) and self-declared my income and we got a mortgage at prime minus 0.75% with an 8% down-payment.

Our broker was Deb Dorsey at Oriana Financial on Queen St E in the Beaches.
posted by winston at 12:40 PM on January 5, 2007

FWIW, the lender for our mortgage is a life insurance company that has only the most vague description of its mortgage products on the web.

A quick googling seems to indicate that Deb is no longer a mortgage broker but now a ReMax real estate agent. But I still recomend that Oriana office.
posted by winston at 12:48 PM on January 5, 2007

Mortgage Intelligence (another mortgage brokerage chain, with which I have no personal experience) advertises mortgages for people with self-declared income (that is, your sworn statement of your annual income amount is the only evidence of income required) with 10% down at prime.

When we got our mortgage, the broker told us that the only reason the lender wants to see your tax return/assessment is to make sure that you're not behind on your taxes (because the government gets first dibs on your property if you go under).
posted by winston at 12:58 PM on January 5, 2007

Thanks everyone for all the advice, much appreciated. Sounds like my initial impulse of 'find a broker' was the right one.
posted by pasd at 2:41 PM on January 5, 2007

To respond to particular points:
chunking express - that's $120k combined income, 60k each.

RRSPs - we're already going to be raiding them to help with the downpayment, such as they are.

25% down, yeah that'd be nice, but saving $60k plus in any timescale we're happy with isn't going to happen.

Thanks again all. Looks like I'm checking my credit rating (should be spotless, I hope) and getting my tax return in and then paying a broker a visit.
posted by pasd at 2:48 PM on January 5, 2007

FWIW, the broker pulled our credit report right off the bat and showed it to us before proceding further with it. I don't know if this is typical, but if you could ask for the same treatment, it would save you from paying for a copy of your credit report.
posted by winston at 10:05 PM on January 5, 2007

Just a note about credit reports, it's a not terribly well known fact that in Canada you are entitled to a free copy of your own credit report. The big two credit bureaus are Transunion and Equifax.

They both try and sell you online access to your credit report, but if you don't mind printing off and filling out their mail-in forms you are entitled to get your report for no charge.
posted by pasd at 6:43 AM on January 6, 2007