On March 26th you will have significantly fewer options to purchase or refinance. A major banks’ “Mortgage for Self-Employed” program will be decommissioned April 1st and the cut-off for submission will be March 26th.
This is due to continuing regulations from the Office of the Superintendent of Financial Institutions (OSFI). Our concern is that if this is an OSFI rule, more lenders may follow and soon it may be much more difficult to obtain financing if you are self employed unless you are willing to work with a “B” lender, who generally have rates that are 1% – 2% higher than banks.
Jim owns ABC Electronic, the business grosses $750,000 but Jim’s accountant uses write offs to reduce Jim’s net income to $75,000 a year.
With the current rules we are currently able to “state” Jim’s income by adding back certain tax write offs and deductions. In this example we may be able to support an income of $140,000, or a maximum mortgage of roughly $700,000.
As of March 27th we will only be able to gross up Jim’s net income by 15%. This would give a maximum usable income of $86,250, or a maximum mortgage of roughly $400,000.
These changes will lead to a significant drop in most self employed applicants usable income. If you are considering refinancing to access the equity in your home, purchasing a new home to live in, or have a renewal coming up in the next 6 months please call or email the Green Mortgage Team within the next 24 hours as there is not much time left.
Kyle Green and The Green Mortgage Team