Self-employed home programs

Brandon Scott is a Sherwood Park & Edmonton based mortgage consultant and the author of a weekly column entitled Real Estate Solutions in the Sherwood Park News. This article was originally published on October 12 , 2012 I have encountered more entrepreneurs living here in Alberta than anywhere else. Running your own business can be very rewarding. As the boss there can be more flexibility as you are the one that controls the direction of your company. There are trade-offs though like fluctuating income, and long hours which can impact a business owners work/life balance. One of the main benefits I hear from local owner’s time and again is that they appreciate the tax benefits they receive. For instance a business owner may choose to only have a limited amount of personal income from the business after all expenses have been paid thereby reducing their personal income tax responsibility. Good for them. However when that small business owner decides to purchase a new home, vacation property, or investment they may run into some challenges obtaining mainstream financing. Each self-employed individual’s situation is unique and so are the financing options that may be available. For instance is your company being run as a sole proprietor or has the business been incorporated? How long have you been in business? Have you completed your personal income tax returns and did you owe any taxes to the Canada Revenue Agency? If so, have these been paid? Some self-employed individuals pay themselves a lower salary but then do not have enough declared income to qualify for traditional financing. There are programs specifically designed for these types of situations but the down payment required can be increased and the lender may approve the application with a higher interest rate to compensate for the increased risk The rule of thumb here is to plan well in advance of any major purchase to ensure all documentation is in order. There are a variety of home programs and financing options that exist but even still the parameters may limit a borrower’s options.  It’s never too early to sit down with your accountant, financial planner, or mortgage consultant to ensure that your wealth strategy is balanced. Download the current e-edition of the Sherwood Park News