Getting a mortgage as a sole proprietor

Mar 24th, 2022 4:36 pm

#1

BacktoCanada2015 [OP]: Newbie; Aug 27, 2021; 74 posts; 74 upvotes

Mar 24th, 2022 4:36 pm

Getting a mortgage as a sole proprietor

Hello,
I am working on growing my bookkeeping business and hope to get a mortgage in the spring 2023

2021 I still had employment income but also business income as a sole proprietor.

this year I lost the employment income but my business income will be higher.

What about the current business income in 2023 when I apply for the mortgage? Will that count too?
Or are lenders just looking at the tax returns from 2021 and 2022?

Would it be possible to incorporate my business (sole owner) and pay myself a salary? Would that qualify me for a mortgage?

thank you

Last edited by BacktoCanada2015 on Mar 24th, 2022 8:23 pm, edited 1 time in total.

Mar 24th, 2022 4:51 pm

#2

hybridfx2: Member; Jan 19, 2009; 336 posts; 257 upvotes

Mar 24th, 2022 4:51 pm

Most likely need 2 years of income history associated with the business

Mar 24th, 2022 5:28 pm

#3

BacktoCanada2015 [OP]: Newbie; Aug 27, 2021; 74 posts; 74 upvotes

Mar 24th, 2022 5:28 pm

what if one year income was low and the other much higher?

Mar 24th, 2022 6:57 pm

#4

ahhchoo: Deal Addict; Nov 3, 2011; 1209 posts; 322 upvotes; STOUFFVILLE

Mar 24th, 2022 6:57 pm

Did you get T4 from business side? or T5? If you got T5, then you are kind of screwed. Go register payroll and pay yourself to get T4.

Very likely they will ask for 2 year NoA + stubs.

Mar 24th, 2022 7:36 pm

#5

BacktoCanada2015 [OP]: Newbie; Aug 27, 2021; 74 posts; 74 upvotes

Mar 24th, 2022 7:36 pm

ahhchoo wrote: ↑ Did you get T4 from business side? or T5? If you got T5, then you are kind of screwed. Go register payroll and pay yourself to get T4.

Very likely they will ask for 2 year NoA + stubs.

in order to pay myself I would have to incorporate my business. But would that employment income count for a mortgage if I am the owner of the corporation?

Mar 24th, 2022 7:36 pm

#6

BacktoCanada2015 [OP]: Newbie; Aug 27, 2021; 74 posts; 74 upvotes

Mar 24th, 2022 7:36 pm

ahhchoo wrote: ↑ Did you get T4 from business side? or T5? If you got T5, then you are kind of screwed. Go register payroll and pay yourself to get T4.

Very likely they will ask for 2 year NoA + stubs.

I am a sole proprietor

Mar 24th, 2022 8:33 pm

#7

ahhchoo: Deal Addict; Nov 3, 2011; 1209 posts; 322 upvotes; STOUFFVILLE

Mar 24th, 2022 8:33 pm

I mean do you just not pay yourself now?

The big 5 won't look at business income, at least not the last time I asked.

Mar 24th, 2022 8:37 pm

#8

BacktoCanada2015 [OP]: Newbie; Aug 27, 2021; 74 posts; 74 upvotes

Mar 24th, 2022 8:37 pm

ahhchoo wrote: ↑ I mean do you just not pay yourself now?

The big 5 won't look at business income, at least not the last time I asked.

as a sole proprietor you don't pay yourself. All income is just my income

Mar 24th, 2022 8:43 pm

#9

ahhchoo: Deal Addict; Nov 3, 2011; 1209 posts; 322 upvotes; STOUFFVILLE

Mar 24th, 2022 8:43 pm

BacktoCanada2015 wrote: ↑ as a sole proprietor you don't pay yourself. All income is just my income

Understood, it shouldn't matter if you have consistent T4 (combination or 1). Usually the rule is to not change companies 2 year before getting mortgage, but likely that's ok because bank can probably see you working at both, then just one.

Mar 24th, 2022 8:48 pm

#10

BacktoCanada2015 [OP]: Newbie; Aug 27, 2021; 74 posts; 74 upvotes

Mar 24th, 2022 8:48 pm

ahhchoo wrote: ↑ Understood, it shouldn't matter if you have consistent T4 (combination or 1). Usually the rule is to not change companies 2 year before getting mortgage, but likely that's ok because bank can probably see you working at both, then just one.

So it might be a good idea to incorporate soon and start paying myself a consistent salary?

Mar 24th, 2022 9:53 pm

#11

ahhchoo: Deal Addict; Nov 3, 2011; 1209 posts; 322 upvotes; STOUFFVILLE

Mar 24th, 2022 9:53 pm

BacktoCanada2015 wrote: ↑ So it might be a good idea to incorporate soon and start paying myself a consistent salary?

I wouldn't incorporate, you don't have long enough timeline to do it. Check with a mortgage advisor at a bank just in case.

Mar 24th, 2022 9:57 pm

#12

BacktoCanada2015 [OP]: Newbie; Aug 27, 2021; 74 posts; 74 upvotes

Mar 24th, 2022 9:57 pm

ahhchoo wrote: ↑ I wouldn't incorporate, you don't have long enough timeline to do it. Check with a mortgage advisor at a bank just in case.

My business income from 2021 was low. So even if I have this year more i won't qualify.
With a salary in form of a t4 and stub I would

Mar 24th, 2022 10:04 pm

#13

Worriedone: Deal Addict; Dec 3, 2013; 1236 posts; 2011 upvotes; Somewhere over the r…

Mar 24th, 2022 10:04 pm

BacktoCanada2015 wrote: ↑ what if one year income was low and the other much higher?

They average it out

Getting a mortgage as a sole proprietor

Getting a mortgage as a sole proprietor

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