Being self-employed doesn’t stop you getting a mortgage in Canada, but it changes what a lender looks at. An employee shows a pay stub and a letter. You show your tax returns, and the deductions that keep your tax bill low also lower the income a lender can use. Knowing how the assessment works lets you plan a year or two ahead.
What lenders look at
Your income on your tax return
Lenders start from the income the Canada Revenue Agency has assessed. For a sole proprietor or partner, net business income is reported on line 13500 of your return (from form T2125, Statement of Business or Professional Activities), and it flows into line 15000, total income, which appears on your Notice of Assessment (NOA). Net income is after business expenses, so if you claim $40,000 of expenses on $140,000 of revenue, the starting point is $100,000.
Two years of history
Lenders want to see that the income is stable. CMHC recommends at least 24 months in business or in the same line of work for its self-employed insurance, though it says recently self-employed borrowers may still qualify with other strengths, such as having bought an established business, cash reserves, predictable earnings, relevant training and a good credit history. In practice, many lenders use the average of your last two years, and if your income fell, they may use the lower year. Ask your lender which method it uses.
Gross-up or add-back
Because self-employed income is reported after expenses, insured mortgages allow an adjustment. Under CMHC’s self-employed program, income from a sole proprietorship or partnership may be grossed up by 15%, or the lender may instead add back certain eligible deductions. Lenders apply these rules differently, and for uninsured mortgages each lender sets its own policy, so check with your lender before you count on it.
Incorporated business owners
If your business is incorporated, your personal tax return shows only what you paid yourself as salary or dividends. Some lenders will look at the company’s financial statements as well. Expect to provide both personal and corporate documents, and ask how the lender treats income kept in the company.
The same qualifying tests as everyone else
Once your income is set, you go through the normal stress test: you must qualify at the greater of your contract rate plus 2% or 5.25%. For insured mortgages, CMHC’s limits are 39% of gross income for housing costs (GDS) and 44% for all debts (TDS). See GDS and TDS ratios.
Worked example
Jordan is a sole-proprietor graphic designer buying with 10% down. Line 15000 on her NOAs shows $92,000 for 2024 and $108,000 for 2025, all from her business. Property tax will be $4,800 a year and heating $100 a month. She has no other debts. Her rate is 4.49%, so she qualifies at 6.49% over 25 years.
| Income the lender uses | Amount | Largest mortgage she qualifies for |
|---|---|---|
| Two-year average | $100,000 | about $411,000 |
| Average grossed up by 15% | $115,000 | about $484,000 |
The gross-up raises her borrowing power by about $73,000. If a lender used only her lower year, $92,000, she would qualify for less than either figure. These amounts are before the CMHC premium, which is added to the loan. Run your own numbers in the affordability calculator.
Documents to prepare
CMHC lists these as the core income documents for its self-employed insurance, and most lenders ask for similar ones:
- Notices of Assessment for the last two years, with your T1 General returns.
- Statement of Business or Professional Activities (T2125) if you’re a sole proprietor or partner.
- Proof of income, such as business bank statements or invoices.
- Proof the business is operating, which can include GST/HST returns, active business account statements, a business licence or articles of incorporation, business credit reports, or financial statements reviewed or audited by an accountant.
- For incorporated owners, the company’s financial statements and corporate tax returns.
- Proof of your down payment and ID, as for any borrower.
If you can’t document enough income
Some borrowers have real income but can’t show enough on their returns. Insured options for income that can’t be verified are limited, and you shouldn’t assume one is available. The usual alternatives are uninsured mortgages with at least 20% down from lenders with more flexible income rules, often at higher rates or with fees, or private lenders, which cost more again. A mortgage broker can tell you what is available today. If you go this route, plan to move to a regular lender at renewal once your returns support it.
Tips to qualify for more
- Plan your deductions. Claiming every possible expense lowers tax but also lowers line 15000. In the two years before you buy, talk to your accountant about the trade-off.
- File on time and pay what you owe. Unpaid CRA balances on your NOA can be a problem for lenders.
- Keep business and personal finances separate. Clean statements make income easier to verify.
- Build your credit and keep card balances low, since debts count toward your TDS.
- Save a larger down payment. More equity gives you more lender choice, and 20% down avoids mortgage insurance.
- Apply with the right lender. Policies on gross-ups, add-backs and incorporated income vary widely, so compare more than one.
Once you have a number, check the payment with the mortgage calculator and the qualifying test with the stress test calculator.
Sources: CMHC, Self-Employed mortgage loan insurance; CRA, sole proprietorships and partnerships; OSFI, minimum qualifying rate; CMHC, GDS and TDS limits.