Karen Explains Mortgages | Mortgages for Business Owners
It is a conversation I have with successful business owners all the time. In fact it is why I decided to specialize in mortgages for business owners. “My business is doing well. I have money in the company. I have excellent equity in my home. So why is the bank telling me I don't qualify?” The answer is often surprisingly simple:
The income that makes sense for your business isn't always the income a traditional mortgage lender uses to qualify you.
“My business is doing well, so why does the bank tell me I don’t qualify?”
Business owners are usually trying to run their companies efficiently. You may leave money inside the corporation, take dividends instead of salary, deduct legitimate business expenses or structure your income with the advice of your accountant. All perfectly reasonable business decisions. Then you apply for a mortgage and discover the lender is primarily interested in what appears on your personal tax returns. Suddenly, a successful business owner can look much less successful on paper
There May Be Another Way to Look at Your Application
Traditional bank financing is only one part of the mortgage market. Depending on your circumstances, an alternative lender may be able to consider your overall financial picture differently.
That could include:
business financial statements
corporate income
bank deposits or cash flow
retained earnings
reasonable business expense add-backs
credit history
liquid assets
equity you already have in your home
The goal isn't to avoid proving income. It's to find a lender whose method of proving income actually reflects how you earn your money.
Don't Automatically Restructure Your Business to Fit a Mortgage
One mistake I see business owners make is changing the way they pay themselves simply because they have been told they need more personal taxable income to qualify. Sometimes that makes sense. Sometimes it doesn't. Before changing your salary, dividends, or tax strategy, I prefer to look at the mortgage options first. Your accountant's job is to help you structure your business appropriately. My job is to determine which lenders are most likely to understand that structure. Those two strategies should work together.
A “No” From Your Bank Doesn't Necessarily Mean No.
It may simply mean: “You don't fit this lender's formula.”
And that is very different. If you're self-employed, incorporated or own a business and you're considering buying, refinancing or accessing the equity in your home, let's look at the complete picture before you change your finances to fit a mortgage application.
Your business isn't a T4 job. Your mortgage strategy shouldn't necessarily be treated like one.
Thinking about refinancing or accessing equity? Let's review your numbers first. A short strategy conversation can often tell us which lending path makes the most sense—and which ones don't. Contact me today for a quick conversation about how to structure your mortgage before you restructure your income.