How did I get a mortgage as self employed in Canada 🇨🇦🏡

I got this house in March of frame 23 and the banks rejected me for a mortgage rejected if you are new to the channel my name is navjot and the objective of this channel is to spread financial literacy amongst new immigrants coming back to today's topic there is a lot of misinformation which is available when you are self-employed a lot of people say that you cannot get a mortgage I'll try to bust all those myths and give you hard numbers of why it makes sense to go to alternate lending if the banks reject you so let's get started [Music] foreign rejected for a bank mortgage I'll also be introducing what B lenders are and they're also called alternate lenders I don't really like the word b lender so they are alternate lenders and we'll talk about that and we'll also talk about why alternate lenders make sense and we'll also talk about the maths behind it now let's talk about why was I rejected by the Banks for this mortgage and the reason is that I am self-employed a lot of you know that I don't have a full-time job this is my full-time job content creation and doing mortgages and simran also is a contract worker so she has a full-time job but because it's a us-based company they pay her through the incorporation and technically she also becomes self-employed and that was the reason why I was rejected because what the banks are looking for is two years of tax filing if you are self-employed now technically I did complete two years but I did not file for the second year taxes plus my income in the first year and the second year was very different so there are norms around that there are regulations around you know what they can and what they cannot take and that was one of the reasons why I was rejected the other things that the bank like is that you have full-time job job because for some reason I am not saying it's right or wrong for some reason they do feel that full-time jobs are more secure now it kind of is true but honestly looking at all the tech layoffs I don't think full-time job is any safer than a contract job but unfortunately I did not make the rules ban State and the third one and honestly I don't see it a massive problem for salvations for people I work with is they require good credit it should be idly 680 plus a lot of people think that it requires 700 people require 750 you need 800 credit score no the minimum credit score that you need is 680 and sometimes you can also be qualified for lower credit score which is 620 630 as long as it makes sense if you've watched my video where I talked about the amount of money that we made last year the amount of mortgage that we required it was about 520 000 for this particular house it was nowhere close to the amount of money that we made now the trade score for similar and I was very good but I did not have a two-year tax filing as a self-employed instrument does not have a full-time job and therefore we were rejected so are these rules Fair absolutely not let's talk about a topic which is very closed captioning not available [Music] fraud that's happening by the mortgage agent this entire case can become a criminal offense and therefore you can be deported if you are on PR now a lot of people think that you cannot get caught when you are doing that and that might be true but if you are caught the worst case scenario is really bad and even the best case scenario is as good as reputation because if you are not able to buy a car if you're not able to get a bank credit if you're not able to get a credit card it's as good as leaving the country now because I'm a mortgage agent I get memos from fitzra and Aussie and we know that they are cracking down on fraud and it's now becoming increasingly difficult for these fraud agents to create falsified documents and make a fool out of this entire system now I made an entire video on mortgage fraud a few months back if you are interested in knowing more about this do check out the link in the description now the question is what should self-employed people do and people who do not have enough credit do when they are rejected by the Banks and the answer is simple you need to talk to a mortgage agent who understands policy well there are B lenders also called alternate lenders who look at self-employed income very differently they do not require two years of self-employed income they are okay with six months of bank statements or self-employed contract income they will lend on low credits and even bankruptcies and they can lend you more money for the same amount of taxable income all you need to do is reach out to someone who understand policy well now let's talk about the differences between a prime lender and an alternate lender or a B lender when it comes to cost now first of all we all know what prime lenders is it's the top five bands but we also have a misconception about First National RNG MCAT these are all credit unions they are all monolenders a lot of people think that they are private lenders or alternate lenders or B lenders they are not they have similar policies as that of the top five banks in fact first National's biggest investor is TD and therefore they all operate under the same umbrella of prime or a lending and when it comes to alternate lenders they are not a black box they are all banks you actually know the first one that I work very closely with is Equitable Bank this is the bank who gave me the mortgage for this particular house is self-employed as well then you also have Home Trust within the us the biggest investor of Home Trust is Berkshire Hathaway which is Warren Buffet's company and then you have Duca which is the Local Credit Union in Ontario and they're pretty good and my sister's mortgages with them and and they are called near Prime lenders because their interest rates are not very different from the top Banks now these are only three or 40 50 different lenders that we work with so if you have a problem and the banks are not qualifying you for a mortgage all you need to do is click on the link in the description book a call with me and we'll find you a solution now let's talk about the difference between the prime lenders and the alt lenders the first one is about interest rates where you can take a fixed or a variable rate but when we talk about the alternators you can only take a fixed rate which is point seven to one percent higher depending on the strength of the file when it comes to down payment you can do a minimum five percent down payment but when it comes to alternate lenders you require a minimum of 20 down payment now when you do a five percent down payment you pay something called as cmhc insurance or mortgage insurance which is three to four percent of the mortgage amount but you're Fair doing a 20 down you do not pay any insurance premium however when you're going to an alternate lender like Equitable bank there's a lot more risk that they are taking because they are willing to give me a mortgage when the banks actually rejected me so in order to cover the cost of that risk they charge a one percent end of fee and then when it comes to amortization the maximum which is available for top five banks is 30 Euros if you're doing a 20 down and for alternate renders you can go up to 35 even 40 Years of amortization to reduce the burden of monthly payments now the reason why I wanted to discuss about costs here is because I do understand that the cost of borrowing has increased when you're going to an alternate lender and this is one of the reasons why these fraud mortgage agents are making documents because they are charging the same one percent that you will generally pay to the alternate lender to cover their risk but if you compare this higher cost of borrowing with an alternate lender versus the cost and the risk that comes with committing fraud if you are caught you can be deported you have made so many sacrifices to come to Canada and make a life here that it's not worth risking everything just to buy a house so do the right thing reach out to the right mortgage agent because there is a policy solution for everything now coming back to the presentation should you even go self-employed or contract and the answer is do you have 20 down payments because P lenders do not operate with less than 20 down so if the answer is yes you should 100 go self-employed because then your ceiling on the amount of money that you can make is a lot higher and you'll be making a lot more money and you will be saving a lot more taxes and we'll talk about that in the next slide as well and if the answer is no you do not have 20 down then either you'll have to wait till you have the 20 down you have to stick to your full time to obtain the time you close your first house now despite the high cost why do alternate lending still make sense now let me take an example of if you have a full-time job where the banks will lend you versus if you have a contract job with the bank will ask for two years of tax filing let's take the same income hundred fifty thousand dollars and hundred and fifty thousand dollars in both the scenarios the federal tax in your full-time job which will be deducted at source will be twenty seven thousand dollars then we have provincial tax which is about sixteen thousand dollars then you have CPP and EI premiums which is about four thousand five hundred dollars and overall your after tax income will be fifty thousand dollars less about forty nine thousand dollars less at 101 462 dollars now let's compare this against a contract job if you have it through your incorporation what happens is you take dividends as personal income because you only need five thousand dollars a month that's the dividend that I take from my incorporation so irrespective of how much money I make in the incorporation I only take out five thousand dollars a month which is sixty thousand dollars on that personal income I will pay federal tax of six thousand dollars and the tax rate is a lot lower because my slab at sixty thousand dollars is a lot lower than what it is at 150 000 my provincial tax is about three thousand dollars I do not have to pay any CPP and EI premiums because these are dividends these are not salary compared to the fifty thousand dollars of taxes that I'm paying as a full-time employee I only pay about ten thousand dollars or less than ten thousand dollars of taxes as my personal dividend income but I also need to pay taxes on the balance net income in the business which is hundred and fifty thousand dollars minus the sixty thousand dollars of dividends that I took which is ninety thousand dollars and on that I have to pay twelve point two percent in Ontario which is about eleven thousand dollars so after tax income if I include my personal income after taxes and my business income after taxes will be 129 650 which is an entire twenty eight thousand dollars more than if I was a full-time employee so like you can see here even if you have a full-time job and you are banks favorite and you're able to get a mortgage from a bank it's still not worth going to a full-time job just take a mortgage from a bank because you save 28 000 if you are on Contra and if you structure your income very well with an accountant and not to forget if you are on contract in most cases and in fact in simran's case she actually made double the money so her income is in fact much more than your full-time job and you also deduct expenses because you need an office you need stationary you need a lot of things for your job for example for my job I need a camera I need uh you know Zoom subscriptions and therefore all that costs can be deducted from your business income and your taxable income on the business is a lot lower these are all legal expenses that you can deduct I'm not doing anything that wrong here and still because of how the business taxes are structured you pay a lot less tax so your overall savings will be a lot more than 28 000 if you are on contract but the downside is if you are on contract and if you have not come to two years of taxable income you will be going to an alternate lender let's say you are taking a 800 000 mortgage you will be paying about six thousand dollars more in interest which is about 500 a month and you will be paying a one percent lender fee which is only one time eight thousand dollars and that cost of borrowing is half of what you would otherwise pay CRA if you are a full-time employee and you are going to a bank to get your mortgage now don't get me wrong ninety percent of mortgages that I do are with big Banks but I also wanted to give a flip side of if you're self-employed and if you do not have two years of income you do not have to resort to fraud there are options available if you have 20 down all you need to do is book a call from the description and I'll reach out to you and we'll discuss about your options and do subscribe to the channel so that you do not miss any video on this channel I make videos every single week so do subscribe to the channel that's all I have for today miss the hanging videos bye bye thank you [Music]

Channel: Grow with Nav

Views: 4,680

Keywords: Canada, Mortgage, Self-employed, Contract workers, Bank, Rejection, Proof of income, Credit score, Financial stability, Traditional banks, B-lenders, Alternate lenders, Loan application, Down payment, Interest rate, Amortization period, Debt-to-income ratio, Refinance, Home equity, Pre-approval, Appraisal, Closing costs, Property tax, Qualifying income, Gross income, Net income, Tax returns, Business income, Employment letter, Credit report, Credit history, Debt consolidation

Id: Mg9i68klb2U

Length: 11min 32sec (692 seconds)

Published: Sun May 14 2023