I’m a self-employed worker looking for a mortgage loan, but my declared income isn’t representative. Are there solutions?

Wednesday January 31st, 2018

I’m a self-employed worker looking for a mortgage loan, but my declared income isn’t representative. Are there solutions?

Your declared income isn't representative of your current income? If this is the case, we’ve got good news: you now have access to a program that could help you buy a property.

Mortgage loan for self-employed workers with self-reported income

The Business for Self (ALT.A) program allows self-employed borrowers to self-report their income. However, borrowers must be able to provide proof of income, as well as provide a down payment of at least 10%.

What kind of business owner can apply to this program?

The ALT.A program is not for all types of businesses. Self-employed business owners must meet the following criteria:

  • Must be a small or medium-sized company;
  • Part of the customer base must be composed of retail customers;
  • The business must have many customers;
  • The company must accept payments in cash;
  • The company must show an increase of revenue year over year;
  • The company is profitable;
  • The company provides services;

Examples of self-employed business owners eligible to the program:

  • Construction: plumber, carpenter, electrician, machinery operator;
  • Residential services: pruning, extermination, housekeeping, lawn mowing, snow removal;
  • Beauty services: haircut services, cosmetic services, nails;
  • Health and wellness services: chiropractic, osteopathy, massage, personal trainer;
  • Misc. services: tattoo and piercing, auto mechanic, building inspector.

ALT.A mortgage: Self-employed workers with self-reported income qualification:

  • In business for at least two years;
  • Must provide at least two years of proof of income;
  • Provide self-reported income information relevant to line of business;
  • Past income tax paid in full (proof WILL be required);
  • Must have an excellent credit score;
  • Must have a minimum down payment of 10%;
  • Must purchase a property of a maximum of 2 units where 1 unit must be owner occupied;
  • The maximum value of the property does not exceed $1,000,000;
  • The maximum amount of the loan is $600,000.

What are the additional costs related to this program?

Not all lenders endorse the ALT.A program. Also, interest rates may be slightly higher through this program, ranging from 0.05% to 0.2% more.

Mortgage insurer: Genworth

The ALT.A program is exclusively offered by Genworth, a mortgage insurer. You've probably heard of the Canada Mortgage and Housing Corporation (CMHC); Genworth offers the same services. ALT.A's mortgage insurance costs are higher than a property purchases with a declared income. Here is a comparison of the two situations:

Mortgage loan WITHOUT ALT.A program (and a 10% down payment)

Purchase price = $300,000
Genworth premium (3.1%* of $300,000) = $9300
Tax on Genworth premium, payable at the notary (9% of $9300) = $837
Loan + premium (3.1%) = $309,300
Monthly payment at 3% = $1463.75

Mortgage loan WITH ALT.A program (and a 10 % down payment)

Purchase price = $300,000
Genworth premium (5.85 %* of $300,000) = $17,550
Tax on Genworth premium, payable at the notary (9% of $17,550) = $1579.50
Loan + premium (5.85 %) = $317,550
Monthly payment at 3% = $1502.79
A monthly difference of $39 ($1503 - $1464 = $39).

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*Premiums may vary. Updated January 26, 2018.

There is obviously a price difference. This is why we suggest this program only when necessary. In some cases, the program will prove very useful for eligible customers, because it will allow them to buy a property!