Real estate experts say that while it is still possible for self-employed professionals to obtain mortgages from large banks, the money may come at a higher rate and will probably need a bigger down payment. This is just one of many problems that self-employed individuals face when trying to secure a mortgage. For many, it’s a mystery why Self Employed individuals who may be able to justify higher and more consistent income than their employed counterparts are discriminated in the approval process. John Andrew, a real estate expert from Queen’s University and Matthew Robinson shed light on the matter.
According to John Andrew, customized products for the increasing number of self-employed individuals generally involve a 10% minimum down payment, as opposed to the 5% normally offered, and the 5 year fixed for most is higher than what many banks offer.
However, there are still some options for self-employed professionals available.
Andrew continues: “If you can show your income tax records and things like that going back 10 or 15 years, and your income is fairly steady or even better, rising, they’re still going to consider you to be self-employed, but you’re going to be about as well off as you can possibly be.”
If you’re self-employed, banks will always need more to trust you than if you worked for a company. Lenders justify these high rates by claiming that processing the requests of self-employed clients requires more time and extra work and that this in turn costs the bank money.
According to Matthew Robinson, chief executive of W.A. Robinson Asset Management Ltd., “Everybody thinks they deserve a 2.99% mortgage. But at the end of the day, a 2.99 mortgage is zero risk. It’s the lowest end of the scale […] If there’s any work involved, if there’s any administration on any level, the bank cannot afford to do a 2.99 mortgage. There’s not enough room.”
But how can you avoid this problem as a self-employed professional? Robinson stresses the importance of using a mortgage broker whose relationships and connections will help things go your way.
Robinson continues: “Mortgages are becoming so complex, and there are so many options for people, they should actually be using a mortgage broker even if they think they’re the best client in the world.” For even regular mortgage seekers, a mortgage broker can be a great option that offers a real opportunity to save money.
Bottom Line: The mortgage world is becoming so complex that even for those who aren’t self-employed, the benefits of using a mortgage broker are notable. But when it comes to a self-employed professional, the use of a broker is virtually essential. Where self-employed individuals come into difficulty is the time and effort it takes for institutions to verify them as reliable clients, and by having a good mortgage broker vouching for you this process can be made a lot easier.
For more information on anything to do with securing a mortgage as a self-employed individual, don’t hesitate to contact Tim Lacroix on 403-648-1541.
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