Many self-employed borrowers assume they will automatically pay higher mortgage rates than salaried employees. While this can sometimes be true, it is not always the case. Mortgage pricing is based on risk, documentation, and stability, not simply employment type.
This guide explains whether self-employed mortgage rates are higher than those for salaried borrowers, why lenders price loans differently, and what factors influence the final rate you are offered.
Why Mortgage Rates Differ Between Borrowers
Mortgage rates are not one-size-fits-all. Lenders assess each borrower individually and price loans based on perceived risk.
Key factors include:
- Income stability
- Credit history
- Documentation quality
- Down payment or equity
Employment type affects how these factors are reviewed, not whether approval is possible.
How Salaried Borrowers Are Assessed
Salaried borrowers typically provide:
- Pay stubs
- Employment letters
- T4 slips
Because income is predictable and easy to verify, lenders see lower uncertainty. This often results in access to standard rates with fewer conditions.
How Self-Employed Borrowers Are Assessed
Self-employed borrowers may earn equal or higher income, but documentation is more complex. Income may fluctuate, be reduced by deductions, or be earned through a business.
Lenders often require:
- Two years of Notices of Assessment
- Tax returns
- Bank statements
- Business financials
The added review increases uncertainty, which can influence pricing.
When Self-Employed Rates Are Similar to Salaried Rates
Self-employed borrowers may receive rates similar to salaried borrowers when:
- Income is consistent over multiple years
- Taxable income is strong
- Documentation is clear and complete
- Credit history is solid
In these cases, lenders see comparable risk.
When Rates May Be Higher for Self-Employed Borrowers
Rates may be higher when:
- Income fluctuates significantly
- Taxable income is reduced by deductions
- Documentation is limited
- Alternative or private lenders are required
Higher rates reflect risk management, not punishment for being self-employed.
The Role of Lender Type in Pricing
Bank Lenders
Banks usually offer the lowest rates but require clean documentation. If a self-employed borrower qualifies, pricing is often competitive.
Alternative (B-Lender) Lenders
B-lenders offer more flexibility with income review. Rates are typically higher than banks to reflect increased risk and flexibility.
Private Lenders
Private lenders focus on equity rather than income. Rates are higher and usually intended for short-term use.
Credit Still Plays a Major Role
Credit affects pricing for all borrowers. A self-employed borrower with strong credit may receive better pricing than a salaried borrower with weaker credit.
Late payments, high balances, or limited credit history can increase rates regardless of employment type.
Equity and Down Payment Considerations
Higher equity reduces lender risk. Borrowers with:
- Larger down payments
- Lower loan-to-value ratios
often receive better pricing, even when income is complex.
Short-Term Cost vs Long-Term Strategy
Some self-employed borrowers accept higher rates temporarily to access financing, then refinance later when income documentation improves.
Evaluating cost over time, rather than only the initial rate, helps with decision-making.
Common Misconceptions About Self-Employed Rates
- Higher income does not guarantee lower rates
- Self-employed does not always mean higher pricing
- Documentation quality matters as much as income
Understanding these points helps set realistic expectations.
Final Thoughts
Self-employed mortgage rates are not automatically higher than salaried rates. Pricing depends on how income is documented, overall financial strength, and lender type.
When income is clear and stable, pricing differences may be small. When income is complex, rates reflect that complexity.
Note: Rates and costs vary based on your credit profile, available equity, and location.