Securing a mortgage as a gig worker is not easy, but it can be done.
Mortgage broker and LowestRates.ca expert Leah Zlatkin says gig workers must show consistent income for two years, which could be challenging considering the sometimes-transient nature of gig work. However, most gig workers do have a steady stream of income, and while they can be tempted to keep it off the books, Zlatkin advises against that, noting workers must demonstrate two years of provable income and paid taxes.
“You have to declare it,” she said. “When it comes to B lenders, some will be flexible and do stated income and things like that. It is quite a bit harder to prove if you’re doing odd jobs here and there, and there have been gaps in the work and you’re trying to prove you're consistently paying a mortgage.”
Stated income, Zlatkin explains, is different than employment income: the former entails a lender scrutinizing a company’s financial statements to decipher how much money it is earning in revenues versus how much it spends on expenses.
“Somebody with their own corporation who keeps money within the business, and has quite a bit coming in from different things they’re working on, but pays themselves a smaller salary will be okay if they can prove they’re bringing in more money, Zlatkin said. “They might qualify for more money at a B lender if they have a strong balance sheet.”
Hit that Two-Year Milestone
On the subject of registering a personal corporation or incorporating, Laura Martin, Chief Operating Officer of Matrix Mortgage Global in Toronto, says either is paramount for a gig worker.
“With a business license that’s at least two years old, you’re eligible for all the same great rates and lender products as salaried borrowers,” she said, adding gig workers should deposit all of their cash.
Zlatkin also says keeping records of invoicing is important, as is paying yourself an annual salary. Unfortunately, there are too many people who don’t stay on top of the small things and end up owing back taxes, which obviously complicates mortgage qualification.
“You want to have two years of consistent gig work, so if last year you brought in $60,000 doing odd photography jobs and this year you want to move to Florida for vacation for three months but you’ve only done $40,000 of work this year, you need to ramp it up so you have two years of a consistent average of $60,000,” Zlatkin said.
Zlatkin also reminds that lenders don’t consider the federal government’s COVID-19 wage subsidies as income.
She also says A lenders are wary of cash jobs.
“As an employee or somebody who works for themselves, you have to do things properly. A lenders won’t look at money that’s not stated on your taxes.”
