Self-employed in Alberta? Read this before tax season

If you are incorporated, contracting, or running a sole proprietorship, your mortgage is decided by a document you sign in April — long before you ever start house shopping.

Lenders read net, not gross

A traditional lender looks at line 15000 of your Notice of Assessment, not your revenue. If you invoiced $200,000 and wrote enough down to declare $70,000, your approval is built on $70,000. Every dollar your accountant saves you in tax costs you roughly three to four dollars of mortgage.

The two-year rule

Expect to provide two years of T1 Generals with statements of business activity, two years of Notices of Assessment, and proof that HST or GST is current. Most lenders average the two years. If year two is lower than year one, they often use the lower figure — declining income is the one pattern underwriters will not average away.

Add-backs you can sometimes recover

• Capital cost allowance — a paper expense, and many lenders will add it back.
• Business-use-of-home expenses, in part.
• One-time or non-recurring costs, if you can document them clearly.

Incorporated? Some lenders will look at retained earnings and consider corporate income on top of what you pay yourself, provided you can show the business is stable and you own enough of it. This is lender-specific and it is exactly the kind of thing a broker is for.

If the numbers do not work this year

Alternative — "B" — lenders will use bank statements or a stated-income structure instead of your NOA. Expect roughly 20% down, a rate premium of one to two points, and a lender fee. It is not a failure. It is a two-year bridge: you buy now, you show two clean years, and I move you to an A lender at renewal.

General information only, not financial advice, and not an offer of credit. Figures and program limits are current at the time of writing and do change — confirm the details that apply to your file with me before you act on them.

← Back to all guides