The basics
What is a stated income mortgage?
Write-offs lower your taxable income. They shouldn't lower the house you can buy. Here's how self-employed lending actually works in Canada.
The short answer
A stated income mortgage is a Canadian mortgage program for self-employed borrowers that qualifies income using documented business revenue — bank deposits, financial statements and invoices — instead of the net taxable income shown on a personal tax return. Income is still verified; it is simply verified through business records rather than a T4.
Why the tax return is the problem
Good accounting reduces what you owe. Vehicle costs, equipment, home office, materials and subcontractor payments all come off the top, so a business generating $220,000 might report $70,000 in net income. A traditional lender reads the $70,000 and stops there.
A stated income program reads the whole picture: what the business brings in, how consistently it does so, and what a reasonable owner's income looks like after real expenses. The result is a qualifying figure that reflects your actual capacity to make payments.
What you'll typically provide
- Six to twelve months of business bank statements
- Two years of business financial statements or T1 Generals with statements of business activities
- Business licence, GST registration or articles of incorporation
- Recent invoices or contracts showing ongoing work
- Notices of assessment confirming no outstanding tax balance
- Standard credit, down payment and property documentation
Exact requirements vary by lender, program and file.
At a glance
Traditional vs. stated income
| Factor | Traditional mortgage | Stated income mortgage |
|---|---|---|
| Income proof | T4s, pay stubs, employment letter | Business statements, financials, invoices |
| Income used | Net taxable income on the tax return | Documented business revenue, adjusted |
| Best suited to | Salaried and hourly employees | Self-employed owners and contractors |
| Down payment | As low as the program minimum | Often higher, set by lender and insurer |
| Rate | Standard posted lender pricing | Standard to modestly higher, file dependent |
| Verification | Employer confirms income | Business records confirm income |
Worked example
How it works in theory: a worked breakdown
A traditional lender would have used the $70,000 net income on the T1.
Step 1
Establish gross business revenue
$220,000documented deposits
Twelve months of business bank deposits are totalled and checked against invoices and financial statements for consistency.
Step 2
Apply an expense factor
− 35%industry expense factor
The lender deducts a reasonable operating cost allowance for the industry — often 20% to 50% — rather than accepting every tax write-off as a real cash cost.
Step 3
Arrive at qualifying income
$143,000vs. $70,000 on the T1
What remains is the income the mortgage is underwritten on. Compare it to the $70,000 net income on the tax return that a traditional lender would have used.
Step 4
Run the debt-service ratios
~$4,650/momaximum housing cost
Qualifying income is tested against housing costs (GDS, around 39%) and total debts (TDS, around 44%) at the stress-test rate, not the contract rate.
Step 5
Translate into a mortgage amount
~$680,000indicative mortgage
After property taxes, heat and any strata fees are carved out, the remaining payment capacity sets the mortgage size the lender will support.
Step 6
Add the down payment
~$850,000indicative purchase price
With 20% down, that mortgage translates into a purchase price roughly two and a half times what the tax return alone would have allowed.
Same borrower, traditional underwriting
- Income used
- $70,000 (net on the T1)
- Indicative mortgage
- ~$330,000
- Indicative purchase price
- ~$412,000
Same borrower, stated income underwriting
- Income used
- $143,000 (documented revenue, adjusted)
- Indicative mortgage
- ~$680,000
- Indicative purchase price
- ~$850,000
Illustration only, not an approval or an offer of credit. Expense factors, debt-service limits, stress-test rates, property taxes and lender policy all vary, and your own numbers will differ.
See these numbers run on your own business
Send a few details and we'll show you the number a self-employed lender would actually use.
Step by step
How the process runs
Conversation
We look at how you're paid, what you write off and what you want to buy. No credit pull yet.
Document review
We assemble the business records that best represent your income and flag gaps early.
Lender match
Your file goes to the lenders whose self-employed programs actually fit it, not to whoever is closest.
Approval and close
Conditions get cleared, the appraisal is ordered, and you sign with your lawyer or notary.
Common questions
Frequently asked questions
Is a stated income mortgage the same as a no-documentation mortgage?
No. Income still has to be documented and declared honestly. The difference is which documents count: business bank statements, financial statements and invoices are used to establish income instead of pay stubs and a T4.
Are stated income mortgages legal in Canada?
Yes. They are offered by regulated Canadian lenders under self-employed lending programs. Misrepresenting income on any mortgage application is fraud regardless of the program used.
How long do I need to be self-employed to qualify?
Most lenders look for at least two years of self-employment history, though some consider shorter track records when the borrower previously worked in the same field.
Will I pay a higher interest rate?
Sometimes. Rates depend on the lender, your credit profile, the size of your down payment and whether the mortgage is insured. Strong files often price close to standard rates.
How much down payment is required?
Self-employed programs commonly ask for more than the minimum, and the exact requirement depends on the lender and insurer. We confirm it before you start shopping.
Find out what you actually qualify for
Send your details and we'll review your business income the way a self-employed lender does — no credit pull to start the conversation.