Changes for self employed Canadians

Recently CMHC (mortgage default insurer) announced they will make it easier for self employed clients to qualify for a mortgage. New rules will take effect October 1, 2018. We will have to wait and see what kind of impact it will have on real world transactions.

Changes aimed at giving lenders more guidance and flexibility to help self-employed borrowers:

  • Providing examples of factors that can be used to support the lender’s decision to lend to self-employed borrowers who have been operating their business for less than 24 months, or in the same line of work for less than 24 months such as acquiring an established business, sufficient cash reserves, predictable earnings and previous training and education; and
  • Providing a broader range of documentation options to increase flexibility for satisfying income and employment requirements when qualifying self-employed borrowers such as the Notice of Assessment (NOA) accompanied by the T1 General, the CRA Proof of Income Statement and the Statement of Business or Professional Activities (T2125) to support an “add back” approach for grossing up income for sole proprietorship and partnerships.

We expect other insurers to follow with similar policies.

Source: CMHC


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