Why banks decline self-employed borrowers
Legitimate business expenses reduce your taxable net income. Banks typically qualify you on that net figure (Line 15000 of your T1), so a business with healthy cash flow can still look like it earns too little. It's usually a documentation issue rather than an affordability issue.
1. Traditional: two-year average income
Major lenders generally average your last two years of declared personal income from your Notices of Assessment. If that average supports the mortgage, you may access the same products as salaried borrowers, with standard down payment rules.
2. Add-backs of eligible expenses
Some lenders add certain expenses, such as depreciation (capital cost allowance) or other non-cash items, back to your income. Which items count, and how much, varies by lender.
3. Stated income / self-declared income
You declare a reasonable income consistent with your industry and business history. These programs are mostly offered by alternative (B) lenders and some A-lenders, and generally require a larger down payment, often 20% or more, plus solid credit.
4. Bank statement programs
Deposits over a period (often 6 to 24 months) support your income instead of relying only on tax returns. Mostly offered by alternative lenders; rates and fees are typically higher than traditional products.
5. Private / alternative lending as a bridge
Private mortgages can help close a purchase or consolidate debt when other routes don't fit yet. They cost more and should come with a clear exit plan back to a traditional or alternative lender.
How down payment and credit shape your options
- Larger down payment or equity generally widens the list of lenders and programs available.
- Stronger credit opens more A- and B-lender options and better terms.
- Smaller down payment with weaker credit narrows choices, often toward private lending.
When to wait and restructure instead
If you're close to qualifying traditionally, it may be worth filing a stronger year, paying down debt or cleaning up credit before applying. Talk to your accountant about tax implications, the right answer is sometimes "not yet."
Compare the options side by side → · Is an alternative mortgage right for you? →