Self-employed borrowers in Canada often hear conflicting advice about mortgage options. Some are told banks will not approve them. Others assume private mortgages are their only choice. In reality, self-employed borrowers usually have several paths available.
Understanding the differences between bank mortgages, alternative lenders (often called B-lenders), and private mortgages helps you choose the option that fits your income, timeline, and long-term goals.
This guide explains how each option works, when it makes sense, and what trade-offs to consider.
Why Self-Employed Borrowers Have Multiple Mortgage Paths
Mortgage lenders assess risk differently. Some focus heavily on income documentation, while others place more weight on property value and equity. Because self-employed income is structured differently, borrowers may qualify with one lender but not another.
Having multiple options does not mean one choice is better for everyone. The right option depends on:
- How income is reported
- Credit history
- Down payment or equity
- Urgency and timing
Bank Mortgages for Self-Employed Borrowers
How Banks Assess Self-Employed Income
Banks generally have the strictest income requirements. They typically require:
- Two years of Notices of Assessment
- Consistent net income
- Clear tax reporting
Most banks average the last two years of income to determine how much you can borrow.
When a Bank Mortgage Makes Sense
A bank mortgage may be a good fit if:
- Your taxable income is strong and consistent
- Business deductions are limited
- Credit history is solid
- You are not rushed
Banks usually offer lower interest rates and longer terms, which can be beneficial long term.
Limitations of Bank Mortgages
Bank mortgages may be difficult if:
- You write off significant expenses
- Income fluctuates year to year
- You are newly self-employed
Strong cash flow does not always translate into bank approval.
Alternative (B-Lender) Mortgages
What Is a B-Lender?
B-lenders are regulated lenders that sit between banks and private lenders. They offer more flexibility in how income is reviewed while still providing structured mortgage products.
How B-Lenders Review Income
B-lenders may:
- Accept bank statements
- Allow income add-backs
- Be more flexible with deductions
They still review credit and debt levels but often focus more on real income patterns.
When a B-Lender Mortgage Makes Sense
A B-lender mortgage may work well if:
- Income is strong but not clean on paper
- You need flexibility with documentation
- You plan to refinance later
Many self-employed borrowers use B-lenders as a temporary step.
Trade-Offs to Consider
B-lender mortgages usually have:
- Higher interest rates than banks
- Lender or broker fees
These costs may be acceptable for access and flexibility.
Private Mortgages for Self-Employed Borrowers
How Private Mortgages Work
Private lenders focus primarily on the property and available equity rather than income. Approval is often faster and documentation requirements are lighter.
When a Private Mortgage Makes Sense
Private mortgages are commonly used when:
- Timing is urgent
- Income documentation is limited
- Credit issues exist
- Other lenders decline
They are often short-term solutions.
Important Considerations
Private mortgages typically involve:
- Higher interest rates
- Shorter terms
- Clear exit planning
They are not usually intended as long-term financing.
Comparing the Three Options
Each option serves a different purpose.
- Bank mortgages prioritize clean income and offer lower rates
- B-lenders balance flexibility and structure
- Private lenders focus on equity and speed
Understanding where you fit helps avoid frustration and unnecessary applications.
Using a Step-Based Mortgage Strategy
Many self-employed borrowers move through more than one lender type over time. A common strategy is:
- Start with a B-lender or private mortgage
- Improve income documentation
- Refinance into a bank mortgage later
This approach prioritizes access first and cost optimization later.
Final Thoughts
Self-employed borrowers are not limited to one mortgage option. Banks, alternative lenders, and private lenders all serve different needs. The key is understanding how each works and choosing the option that fits your situation today while keeping future plans in mind.
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