PLANNING FOR THE FUTURE
Buying your first home, purchasing an investment property, or anything else mortgage related takes planning. Your credit might not be great right now, or maybe you need to save for a down payment, or maybe you need to refinance and take a few other steps to make it happen. I can help you plan for the future and set you on the path to achieve your goals.
Many of my clients first talk to me a year or two before they can make things happen. I'm thrilled when they stick to the plan and make their dreams happen.
BUSINESS FOR SELF
Self-employed borrowers often write off as many expenses as they can to minimize the income tax they pay each year. This is a standard tax saving technique but it also means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.
This is where the planning comes in. If you know that purchasing a property is something you want to look into, and you don't want to pay the higher interest rates and fees that comes with with private mortgages, you'll need to be reporting enough income. I can help you figure out what product would work best for you and how much income you need to report to make that happen. It can take two year of reporting for you to qualify, so reach out and let's get started on that plan!
A few years ago CMHC (Canada Mortgage and Housing Corporation) made some changes to make it easier for the self employed to qualify for a mortgage.
Generally CMHC wants to see two years established business history to be able to determine an average income. However the corporation has said that as of October 1, 2018 it will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.
Take for example Joe, he has been a carpenter with a company for the past 5 years and in the industry for 15 years, 13 months ago he decided to start his own carpentry business. His main work experience is with the company he used to work for, but now he has the ability to pick up contracts from the industry in which he has many connections.
Previously he would have had to entertain a mortgage with an interest rate higher than the best on the market and may have had to paid a fee, now he will be able to meet insurance requirements and get preferred rates.
Another thing that CMHC has done is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write-offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.
It is encouraging that after years of government conservative policy changes, to finally see a change that will support you and I in the purchasing of a home, rental property or a cottage.