One of the biggest problems I encounter far too often is with our high number of self-employed borrowers (BC has the highest number of self-employed people!). Help your self-employed borrowers ensure they know about these eligible deductions that can be added back to their income to help them qualify for a mortgage.
Income tax time is coming...please spread the word to all your self-employed borrowers NOW! Also...Uncle Bob or Mom doesn't cut it as their "accountant"...please recommend they use a Professional. They can give the shoe box (my filling system!) to a Bookkeeper or other tax professional and then have it filed by an Accountant to save money on the cost of proper tax preparation.
BFS (Business For Self) Income Confirmation:
•· The two (2) most recent years Notice of Assessments (NOA) will be required and we can use the average income (line 150) of the previous two year period.
•· Alternatively, we can possibly use the most recent year's income if the borrower's income has increased year over year for the past 4 years. Normally we are allowed to use an average of the 2 most recent years and add 15% if the mortgage in insured through CMHC/Genworth. Some lenders have different policies...so this is a general guideline. The income derived from the above policy can be grossed up by 15% to account for business deductions.
•· Should the borrower have eligible deductions in excess of 15% of the income on their NOA, the BFS Borrower would need to provide audited financial statements or financial statements prepared by a practicing accountant to support the higher income level in lieu of the 15% gross up. Financial statements in addition to the required two most recent years NOAs must be provided. Eligible Add backs to net income before taxes include: Business use of home, reasonable motor vehicle expenses and capital cost allowances.
Don't be the bearer of bad news...please forward this info along to any and all even those with the weekend Amway business ...it affects 51% of our Province!! How bad is it really to pay a little more tax if it means buying that beautiful BC Home! Remind them that the gains they make on their principle residence are TAX FREE!
Thank you for reading Vancouver!