Self-Employed Mortgage in Canada: How Banks View Your Income

A Real Client Story

One of my clients, a successful Canadian business owner, had been running his company for over a decade. His business was thriving — strong revenues, consistent growth, and plenty of retained earnings.

On paper, though, things looked different. Instead of paying himself a high salary, he drew most of his personal income through dividends — a common tax strategy for entrepreneurs.

When he applied for a mortgage at the bank, he was surprised to learn that not all lenders view dividend income the same way. The way his income was reported — and interpreted — made a major difference in how much he could qualify for.

This is a challenge many business owners face when looking for a self-employed mortgage in Canada. Here’s why.

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How Lenders Qualify Self-Employed Income

Being self-employed doesn’t mean getting a mortgage is impossible — it just means the rules are different. Depending on how you report income and structure your business, you may qualify under one of three main programs:

Traditional Income Programs

Most big banks will consider your salary income plus dividend income, but not always in the way you’d expect. They’ll add your net business income, then subtract the dividends you already paid yourself.

Effect: Dividend income actually reduces the total business income used for mortgage qualification. That means your approval amount may be lower than expected — even if your business is financially strong.

Best for: Business owners who report a higher salary and lower dividends on their personal tax returns.

Stated Income Mortgages

A stated income mortgage in Canada allows lenders to look beyond just your tax return. Instead, they may use:

• 12 months of business bank statements to show consistent deposits

• Recurring income and expenses manually included

• Add-backs like the salary you pay yourself or vehicle expenses paid by the company

  
  

Effect: This approach often paints a much clearer picture of your real cash flow, resulting in higher qualifying income and mortgage approval.

Best for: Entrepreneurs with strong business revenue but lower taxable income due to write-offs or dividends.

Alt-A Mortgage Programs

Alt-A lenders specialize in self-employed mortgages by focusing on the overall strength of your business, not just line items on your T1. They look at:

• Current and historical business earnings

• Growth potential and future projections

• Additional assets such as savings, investments, or real estate

  
  

Effect: Approval is based on the reasonability of your financial picture — not just what’s on your personal tax return.

Best for: Established business owners with healthy companies, strong assets, or retained earnings in the corporation.

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Why Work With a Self-Employed Mortgage Broker?

For business owners, mortgage approval often depends less on “can you afford it?” and more on “how does the lender view your income?” One lender may decline your file, while another approves it with ease.

That’s why working with a mortgage broker who specializes in self-employed clients is so important. The right broker can:

• Match your income structure to the right lending program

• Save you money in taxes by avoiding unnecessary income reporting just for financing

• Access lenders who understand entrepreneurs and offer flexible programs

  
  

Final Thoughts

If you’re self-employed and looking for a mortgage in Canada, don’t assume you’re stuck with what the big banks say. You may qualify for much more under a stated income mortgage or an Alt-A program.

Want insider tips to make mortgage approvals easier when you’re self-employed?