Ask the Mortgages and Financing Expert – Milka Lukacevic
Mortgages for the self employed
There are several perks of being self employed. There’s no one to boss around, you have flexible working hours, the freedom to do what you want whenever you want, the luxury to pick and choose contracts or businesses and the hot of tax benefits or financial rewards. Self employed professionals can save thousands on taxes. There are dozens of deductibles that a self employed professional can claim but that very saving or smart strategy will cost one clearly at the time of applying for a mortgage.
Let us understand one thing at the very onset. There are many self employed mortgage options. Whoever said that people running their own enterprises or working alone don’t qualify for a mortgage is only presenting you half a fact. Yes, being employed makes one a more desirable applicant for a bank. Even if you were running a business with some or many employees and your business and personal taxations are segregated completely, you will face fewer hurdles. It is the status of being self employed that comes with some inherent complications. But, there are many self employed mortgage options. You can show numerous expenses and account for it as your business expenditure and easily get away from paying higher taxes. While this is smart, this makes the banks see very little income or less than desirable take home income. Thus, they deem such self employed people ineligible.
Preparation is The Key
Self employed mortgages have some distinct requisites. How long one has been self employed, professional engagements prior to becoming self employed, yearly income including taxes filed and take home and the present financial profile including outstanding debts and assets, all would come under consideration. Your gross income versus the net income also come into play when determining what type of mortgage and which institution and product would suit you best.
Self employed mortgages require planning. A professional must file taxes and report take home income bearing in mind the eventual requirement of mortgage lenders. Increasing the take home income may be necessary if one is under reporting it. Yearly increase in the take home income is necessary. While the income can stay stagnant and there can be some fluctuations in certain months but the income connot dip dramatically from one year to the next. A downward variance year over year of 20% or more may also raise flags on the income being used for qualification purposes. The premise of self employment is unpredictable and if an applicant shows that predictability in tax returns or incomes over the years, then the mortgage lenders or banks would become concerned and possibly reject a mortgage application.
All these odds can be overcome with planning and meticulous preparation. There are various self employed mortgages that are available and accessible through your Mortgage Broker that your traditional banks may not have. If you are self employed and looking to purchase a home or investment property, refinance, or renew your mortgage call your Local Tri-Cities Mortgage Broker Milka Lukacevic of The Mortgage Centre TMK TRAM – Nominated for POCO’s Best Biz Awards 2015.