Hey guys! Back again on this blog with a post for business owners that I thought might be useful. As business owners, taking on debt through a mortgage might be a bit more complex than if you just had a 9-5 job. And since it’s always good to prepare yourself and learn some things before you actually have to go through them, I decided to do some research and put together this blog post at the same time to summarize my findings!
So whenever you’re going to be going through your first mortgage, hopefully this post will come to mind and you’ll be able to use some of the tips here!
*Disclaimer: This post does not constitute as financial or legal advice whatsoever. Make sure to consult with a professional when making decisions regarding anything mentioned in this article. This article is also researched relating more towards Canadian mortgages.
A little bit of economics first…
Since I’m a business student, I think it’s valuable to preface this post with a little introduction on how the housing market has been affected by COVID, and what expectations we can have for the next while.
According to some data from the National Association of Realtors (in the US), housing prices and sales are likely to increase in the first few quarters of 2021, but then fall in comparison for the latter half of 2021 into 2022. An interesting thing to note, hey, if you’re looking to buy a house?
Essentially, to apply for a self-employed mortgage, most lenders require personal tax Notices of Assessment from the past 2-3 years (RateHub).
If you’re unable to provide those statements from the past 2-3 years, then you need a good credit history and provide a minimum down payment of 10%. Specifically, according to Real Estate Wire, “Homebuyers are required to contribute a 10 per cent down payment on the portion of the price of a home above $500,000, plus 5 per cent on the amount up to that amount.” Plus, you have to find a lender who uses Genworth or Canada Guaranty.
You have to pay a premium if you are only putting down between 5 and 19.99%, and you don’t have to pay it once you can put down 20% or more. The premium is then added to your mortgage and paid off over the life of your loan.
Credit scores are so important, so make sure you’re working to building a good one! Your credit score is mainly influenced by payment history and overall credit utilization. It can subsequently affect the interest rate you are given. Remember the compounding effect of interest? Basically those small percentage differences will mean thousands of dollars in the bigger picture.
Mortgage Calculator Resource
One resource I wanted to point out to you guys that I think will be helpful is this mortgage calculator site. It literally has so many different calculators that can be really helpful when planning out your finances in this area.
- Buying investment properties
- Selling a home
- A Canada specific calculator
- Fixed vs variable rate loans
Of course, buying a home is no small thing. And sometimes renting is more realistic and better for your lifestyle. Here’s a calculator that can help you decide whether renting or buying a house is better.
Hope that post was helpful for you so you can get a headstart into thinking about what you need to consider when you apply for a mortgage as a business owner! Comment below if you learned something new from the post. 🙂