I hear this from business owners a lot.  For some reason, they think it is harder for them to qualify for a mortgage vs someone who earns a salary working for someone else.

This is simply not true.   In fact, it could be the opposite in some cases.  There are many special programs for sole proprietors and business owners with an incorporated business. These programs often allow borrowers to qualify for mortgage amounts that are greater than someone earning a salary.

For sole proprietorS that report income on personal tax returns, some lenders would allow a gross up of 15% or more on net income (income less expenses).  Let’s say if the employer allows you to choose between being an employee or being a contractor for the same position, a contractor would likely qualify for a higher mortgage with the gross up of 15%.

For business owners with an incorporated business, any salary or dividend taken from the corporation can be used to qualify for a mortgage, in addition of net income after taxes of the corporation. This allows tax minimalization on personal taxes and leverage for mortgage at the same time!

The above are suitable for most business owners, whether you are a realtor, IT professional, social media influencer, medical professional, etc.

When it comes to mortgages, each scenario is unique (just like how we are all born different), it is important to have a mortgage professional to go through your exact situation, so that you are aware of all your mortgage options.

Until next time.

Joseph Kwan, CPA, CA

Most people would think of their bank when look for a mortgage.  Are you one of them?  You may be missing out big time, let me explain why:

Your bank can only offer their own products, which may not offer you the borrowing power or rates that you are looking for.  Also, if you want a better than advertised rate, you have to do your own negotiation (YMMV).

I’m often shocked to hear from clients that they never thought of using a mortgage broker before, and this is why I want to educate home buyers/owners here.  The greatest misconception is that mortgage broker charges for their services, which is totally untrue!  Mortgage brokers get paid by the lenders, so it is completely FREE!

What you are missing out on going with a bank rather than a mortgage broker:

💼Business owners (and realtors – look into setting up a PREC see blog link here), are you retaining money in your business by not taking a fair amount of salary due to growing your business or simply trying to save on personal taxes? And at the same time, you are having trouble qualifying for a mortgage due to the low personal income you are showing?

💡This may be a gamechanger for you:

There are some lenders that would consider part of your company’s income after tax IN ADDITION to your personal income, which would significantly increase your borrowing power for a mortgage. This is a win-win situation with tax and mortgage. 😙

🔑The key is to find those lenders – please reach out to a mortgage professional near you. 😉

Have you ever wondered why some people purchase real estate inside a holding company? Would this setup work for you?

If you belong to one of the following groups, you’ll be able to take advantage of using a holding company to purchase investment properties:

1. You are hitting capacity qualifying for mortgages under your personal name – use this setup to increase borrowing power

2. You are a business owner and have an incorporated business, with excess funds to invest – use this setup to benefit from tax deferral between your personal margin tax rate and corporate tax rate

3. You are at the highest tax bracket (54% in Ontario), you would enjoy tax savings of purchasing investment properties in a holding company.

Top 3 misconceptions of getting mortgages in a holding company:

❌You need income in the holding company to qualify for a mortgage – You actually qualify using your personal income – just like a regular mortgage. This is why you can get a mortgage for a brand new holding company.

❌Mortgage rates are much higher for a mortgage in a holding company – This is not true at all. In some cases, the rate could be the same as a regular mortgage!

❌It is more difficult to obtain a mortgage in a holding company – While it is true that not all lenders provide lending to a holding company, but there are a lot of them that does (including Big 5 banks)! You just have to know who they are, and this is where having a mortgage agent that is experienced in this area makes a huge difference.

✅A holding company setup is a good tool that can be utilized to grow your real estate portfolio.  It is somewhat an unknown goodie to most people.

If you are interested in learning more about buying real estate in a holding company, please reach out and see how you can take advantage of this setup with your specific situation.

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If you are a 1st time home buyer or someone in a position to purchase a home, it is a very good time right now with prices coming down significantly from previous highs just a few months ago (as high as 20-30% decrease in some areas). 📉

Yes, interest rates have risen which affects affordability (increased monthly mortgage payments), but at the same time, the overall amount of mortgage you need to borrow is lower. The current interest rates increases may not last long, so once they reverse, you’ll be paying off your mortgage faster. ⚖️

The key is to find out your affordability in this current rising interest market. That way, you know exactly what your budget is, and can focus your search on the properties in the range. Without bidding wars, you have a greater chance to secure a property you love vs a few months ago. GET PRE-QUALIFIED TODAY! 💪

#getpreapproved #mortgagepreapproval #mortgagetips #homebuyingtips #firsttimehomebuyer #mortgageadvice #remax #markham #toronto #torontorealestate #torontorealtor #househunting #househunters