Can You Get a Mortgage in Canada With Only One Year of Self-Employment?

One good year does not establish a pattern. But if you did the same work as an employee before, your file is stronger than it looks.

Sometimes, and the answer depends far more on what you did before you started than on the business itself.

Why two years is the usual answer

Most lenders want two years of self-employment history, evidenced by two T1 returns and two Notices of Assessment. The reasoning is that one good year does not establish a pattern, and a business in its first year has not yet been tested.

That is the default. It is not the only door.

The exception that helps most people

If you are now self-employed doing substantially the same work you previously did as an employee, several lenders will consider the earlier employment as part of your history.

An electrician who worked for a contractor for eight years and now invoices through their own company is not an untested earner. A consultant who left a firm and kept the same clients is not starting from zero. Where the work is continuous and the change is in how you are paid rather than what you do, lenders can and do take the whole picture.

This is the single most useful thing to know in this situation, and it is rarely offered unprompted. Document the prior employment: old T4s, a reference letter, the dates, and evidence the work is the same.

What strengthens a one-year file

A strong down payment. Twenty percent or more changes a lender's tolerance considerably. Some alternative programs open at 20 percent that are closed at 10.

Clean credit. With less income history to rely on, credit carries more weight. This is not the year to carry balances or miss anything.

Evidence the business is real and active. Registration or incorporation documents, a business bank account with consistent deposits, contracts or a client list, an HST or GST number and filings.

Year-to-date results that are consistent. Six or eight months of deposits at a steady level tells a better story than one strong quarter.

A co-borrower with employment income. A spouse with T4 income can carry the ratios while your history builds. Common, and effective.

The realistic routes

An A lender, if the prior-employment continuity applies. Best pricing, and worth testing first rather than assuming you are excluded.

An alternative or B lender. More comfortable with a shorter history, at a higher rate and typically a one to two year term. Used properly this is a bridge: buy now, establish the second year, return to A lending at renewal.

Wait. Genuinely worth considering. If you are eight months in and not in a hurry, the difference between buying now at alternative pricing and buying in sixteen months at A pricing can be substantial. That is a calculation, not a platitude, and it should be run before you commit.

What does not work

Reporting a higher income than you earned to strengthen the application. Lenders verify with the CRA, and the consequences of a misstatement are far worse than a decline.

Applying to several lenders in quick succession. A thin file with a series of recent credit inquiries looks worse than the same file applying once, properly targeted.

The question to ask yourself first

Were you doing this same work before, for someone else? If yes, your file is likely stronger than a literal reading of "one year self-employed" suggests, and it should be presented that way from the start.

If no, and this is a genuinely new venture, expect alternative lending for one term, and plan the route back to A pricing as part of the decision rather than as an afterthought.

David Nataf is a mortgage broker licensed in Quebec by the Autorité des marchés financiers (AMF #3001986744), practising through Groupe Hypothécaire Orbis. He also holds an individual U.S. licence, NMLS #2613311 (Florida), for cross-border files.

This page is for information. Lender programs, rates, requirements and availability vary and can change without notice. Nothing here is tax, legal or accounting advice.