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16 Aug

Are You Self-Employed? Are You Fixated on the Rate?


Posted by: Michael Hallett

Lets face it, everyone wants the lowest rate possible for their mortgage.  However, is the lowest rate always worthwhile?  Let’s take a look at an example:

Bob Smith is a Business owner in Vancouver.  He has a modest business that is experiencing growth year after year.  Bob enjoys the many perks of being a business owner, especially the tax breaks that come along with it!  Since Bob is able to work with his certified accountant, and considerably write down his income, he often saves thousands of dollars a year on taxes. 

Bob would like to purchase a new home.  He has 20% down payment to place on a home, and knows that he grosses more than $100,000 per year in his business.  However, since he currently writes down his income to $20,000/year, I have just informed him that he will need to state his income with a ‘Non Prime’ lender for approval.  

Now if Bob claimed $100,000/year for the last 2 years — he may qualify for the best rate out there!  However, lets look at what that really means: 

Income claimed



Taxes paid




Bob has saved  $23,299/year because of the advantages the government has allowed for self employed borrowers. Now lets compare the interest on a ‘typical’ verified-income loan, and a ‘non prime’ stated-income loan. 


Loan Type



Mortgage Amount 



Interest Rate




1 year

1 year

Interest per Term




 ** For ease of comparison to BC yearly tax rate– 1 year term has been used.

Rates are approximations for example purposes.**

Yes, Bob is paying $2,664 more in interest per year, but with his tax savings of $23,299/year, he is actually saving $20,635/year more than the typical ‘verified-income’ Employee that was able to receive a 2.99%!