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Second Mortgages for Self-Employed and Low Income Individuals
If you are self-employed and have a low income you might be worried about getting approved for a mortgage. This, however, is not the case. Regardless if you own your own business or freelance with other companies you can still become a homeowner.
How To Qualify For A Mortgage
There are three main things you can do to qualify for a mortgage if you have a low income and are self-employed.
1. Assess Your Finances
Figure out how much you are able to afford in order to avoid large amounts of debt. If your main source of income is through freelance, you need to organise your finances accordingly to ensure you have enough money in your bank account to pay towards your monthly mortgage balance.
2. Pay Your Taxes
Being self-employed means you are responsible for paying your own taxes since it is not taking out of your paycheck automatically by the government. Failing to pay your taxes on time can hurt your credit score and affect your chances of getting approved for a mortgage.
3. Work With A Broker
A broker will review your finances and confirm that you are financially prepared for homeownership. Working with a broker will also give you more credibility with financial institutions, meaning banks will be more likely to lend you money through the broker.
How To Qualify For A Second Mortgage
In order to get approved for a second mortgage, you need to be sure you have lived in your home long enough to have built an adequate amount of equity. Equity is the difference between your mortgage balance and your home’s overall value. Therefore, the more you pay off your loan, the more equity you will have in your home. Another way your equity could increase is through appreciation. Most home’s appreciate in value over time, which means your home could automatically be increasing in value over the years. The more equity you have in your home, the more likely you will be approved for a second mortgage.
Another way you can get approved for a second mortgage as a low-income, self-employed individual is by having good credit. Banks want to be sure you are not a high-risk borrower and won’t default on your mortgage payments. Therefore, the higher your credit score is, the more likely lenders will be willing to work with you.
Contact Us
Please contact the Lotus Loans & Mortgages team at 905-791-1100 to learn about more ways you can apply for a second mortgage if you are self-employed and have a low income.
Self Employed Requirements for a Second Mortgage
Being self-employed has a lot of added benefits, such as having a flexible schedule, being your own boss, and working from home. Although there are many benefits to being self-employed, it is not always the easiest to obtain a second mortgage. The main reason why getting approved for a second mortgage is difficult for those who are self-employed is because it is significantly harder to prove your income.
So, to help you get started before you begin your application, our team at Lotus Loans & Mortgages have listed some of the main requirements self-employers need for a second mortgage.
Documents
Supplying the right documentation can help your mortgage get approved. If you are able to supply the Notice of Assessment from your personal taxes over the past three years, this can greatly increase your chances of approval. With this document, your local Brampton mortgage broker could offer you the same rates and mortgage options that are available for more traditional borrowers.
Other documents you should provide include your business’s financial statements. You want to be sure and include all the profits your company has made, as well as your expected revenue for the near future. The more you can show you are financially prepared to take on a second mortgage, the more likely your application will be approved.
Also, provide proof of paying your HST / GST, and supply a copy of your GST license to your local lender. Your mortgage broker will also want to run a credit check on your personal finances, as well as a credit check on your business, so be sure to supply the appropriate amount of information.
Equity
To obtain a second mortgage while being self-employed, you will need to have enough equity in your home in order to be approved. If you have lived in your home for at least five years and have consistently made payments towards your mortgage, you should have enough home equity. To see if you have enough equity, talk with your local broker ahead of time before you send in an application.
It is also important to note, however, that your application will be rejected if you have not paid down your first mortgage enough. You will not be able to borrow more money if you owe too much on your first mortgage.
Contact Us
For more information on self-employed requirements for a second mortgage, or to get started on your application today, please contact the Lotus Loans & Mortgages team at 905-791-1100.