Your accountant did their job. That is why the bank said no.
If you write off expenses properly, your taxable income looks small. The bank reads the net figure on your return and stops there. B and alternative lenders read gross business income and your bank deposits instead. Same person, same business, very different number.
Most self-employed clients do not have an income problem
They have a documentation problem. The money is there. It is just not sitting in the box a bank branch is trained to look in.
What a bank looks at
- Line 15000 on your T1 General
- Two years of Notices of Assessment
- Net income after every deduction
What an alternative lender will also consider
- Gross business income before write-offs
- 6 to 12 months of business bank statements
- GST/HST returns and invoices
- Contracts and client history
- Corporate financials if you are incorporated
The honest trade-off
Alternative lending usually means a higher rate than the bank posted, plus lender and brokerage fees. It also generally requires at least 20% down or 20% equity, because these are conventional uninsured mortgages. Sometimes that trade is worth it to get the purchase done or the debt consolidated. Sometimes it is not, and the better answer is to wait a year and structure your income differently. I will tell you which one I think you are looking at.
Five questions before you apply anywhere
Answer these and you will know roughly where your file sits. Two minutes, no credit check, nothing to sign.
Why work with me
I am a mortgage broker in Brampton and roughly half of what I place goes through B and alternative lenders, with about a third through private lenders. Self-employed files are not an exception in my week. They are most of it.
4.9 stars from 116 reviews. Listed among the Top 3 Mortgage Brokers in Brampton by ThreeBestRated, a ranking I did not pay for and cannot edit.
Rajiv Verma, Mortgage Broker · Mortgage Architects, FSRA Brokerage Licence #12728 · 15 Gateway Blvd, Unit 201-4, Brampton, ON L6T 0G3. General information only. Not a mortgage approval, an offer of credit, or personalised advice. All mortgages subject to lender approval and property qualification.