Self-employed mortgages in Nova Scotia
Self-employed borrowers get declined for one reason: the income on the tax return is smaller than the income in the bank, and the lender only reads the tax return. This page explains how A-lenders and B-lenders each read a sole proprietor and a corporation, what the 15% gross-up and add-backs do, the exact documents to gather, and which Nova Scotia jobs are self-employment even when they don’t feel like it.
Can I get a mortgage if I’m self-employed in Nova Scotia?
Yes. A-lenders approve self-employed borrowers on two years of Notices of Assessment, with CMHC allowing a 15% gross-up or add-backs, a minimum 600 credit score and up to 95% financing on one and two-unit homes. If your returns show too little, B-lenders use six to twelve months of bank statements at a higher rate plus a lender fee.
Two kinds of lender, two ways of reading income
A-lenders are the banks, credit unions and monoline lenders. They lend on verified taxable income, averaged over two years, and they can insure the mortgage, which means as little as 5% down and the lowest rates in the market. Their rules for self-employed files are largely the insurer’s rules, set out in CMHC’s self-employed guidelines: 24 months in business recommended, income from the Notice of Assessment and T1 General or financial statements, 15% gross-up or add-backs, credit score 600 or better.
B-lenders are alternative lenders, mostly trust companies and credit-union subsidiaries. They lend on the cash a business actually produces, read from six to twelve months of business bank statements, and they lend uninsured, so they want a larger down payment, usually 20% or more. The rate is higher than an A-lender’s, and there is a lender fee. B-lender mortgages are usually one- or two-year terms, with the plan being to move to an A-lender once the tax returns catch up with the bank statements.
The decision between them is not about who you are; it is about what your last two returns say. A plumber with two clean NOAs is an A file. The same plumber a year after incorporating, with one thin return, is a B file for now.
Sole proprietor or incorporated: what the lender reads
Sole proprietor
Your business income is on your personal return. The lender takes the Notice of Assessment, reads line 15000 (total income), and confirms it against the T1 General, where net business income appears after expenses on the T2125 statement. Two years are averaged. If the second year is lower than the first, most lenders use the lower figure, not the average, on the theory that the business is declining. If the second year is much higher, they may cap the increase.
The problem is built in. Every dollar you legitimately deduct, from the truck to the home office to the phone, reduces the line the lender reads. A sole proprietor grossing $120,000 and netting $55,000 after expenses qualifies on $55,000, before the gross-up.
Incorporated
The corporation files a T2 and you file a personal T1. The lender reads your T1 first: the salary (T4) and dividends (T5) the company paid you, averaged over two years. That is the default and it is what most bank branches stop at.
The better lenders go further. If you own the corporation outright, they will look at the T2 and the financial statements, and consider retained earnings, profit that stayed in the company, as available income, or add back the corporation’s net income after tax to your personal figure. This is how an owner who pays themselves a modest salary for tax reasons gets qualified on what the business actually earns. Not every lender does it, and the ones that do want a two-year set of accountant-prepared statements.
Dividends versus salary. Both count. Salary is cleaner because it is on a T4 and needs no explanation. Dividends need two years of consistency, and some lenders discount them if they swing year to year. If you are planning to buy in the next two years, talk to your accountant about the mix now; a mortgage is a reason to pay yourself a steadier amount.
Add-backs and the 15% gross-up
Insurers and A-lenders accept that some deductions reduce taxable income without reducing cash. There are two ways to get credit for them, and you use one or the other, not both.
The gross-up. The lender takes your two-year average net self-employment income and increases it by 15%, no questions asked. On $60,000 net, you qualify on $69,000. It is fast and needs no extra paper, which is why most files use it.
Add-backs. The lender goes line by line through the T2125 or the corporate statements and adds back specific non-cash or discretionary items: capital cost allowance (depreciation on equipment and vehicles), business-use-of-home expenses, and sometimes a one-time write-off that will not recur. If your CCA alone is a large share of your net income, as it often is for anyone with a work truck or fishing gear, the add-back method produces a bigger number than the gross-up. It takes longer and the underwriter has to agree with each line.
Riley runs both calculations on every self-employed file before choosing a lender, because the difference between 15% and a real CCA add-back can be the difference between the house you want and the one you settle for.
The document list for self-employed borrowers
This is in addition to the standard list (ID, down payment statements, property details) on the documents checklist. Gather it before the pre-approval, not during the financing condition.
| Document | Why the lender wants it | Sole prop. | Incorporated |
|---|---|---|---|
| Notices of Assessment, two most recent years | The income figure the lender uses, and proof of whether you owe CRA | Yes | Yes (personal) |
| T1 General returns, two years, complete with T2125 | To see how net income was arrived at and what can be added back | Yes | Yes (personal) |
| Financial statements, two years, accountant-prepared | Corporate income, retained earnings, shareholder loans | If available | Yes |
| T2 corporate returns, two years | Confirms the statements; shows corporate tax paid | — | Yes |
| Articles of incorporation or business registration | Proves ownership share and time in business | Registry of Joint Stock Companies registration | Yes, plus share register if not 100% owner |
| GST/HST returns, most recent year | Confirms gross revenue independently of the T1 | If registered | Yes |
| Business bank statements, 6–12 months | Required by B-lenders; used by A-lenders to confirm the business is active | Yes | Yes |
| Proof of no CRA arrears | The NOA or a CRA statement of account showing a nil balance | Yes | Yes, personal and corporate |
| Contracts or invoices in hand | For contractors and commissioned sales: evidence the income continues | Helpful | Helpful |
Taxes must be paid up to date
The Notice of Assessment does two jobs. It states your income, and it states whether you owe the Canada Revenue Agency. A-lenders will not fund with a balance owing, because CRA can register a lien that ranks ahead of the mortgage. If you are on a payment plan, the mortgage usually has to clear it. File on time, pay on time, and bring the CRA statement of account that says so.
A or B: the decision
Riley’s order of operations on a self-employed file is fixed. First, can it be insured at an A-lender? That means two years of NOAs, 600+ credit, GDS under 39% and TDS under 44% on the grossed-up or added-back figure at the stress-test rate. If yes, it goes there, and the borrower pays no broker fee; the lender pays the brokerage.
If not, why not? A single weak year, a short time in business, or a large gap between net income and deposits points to a B-lender bank-statement program. The lender averages the business deposits over six or twelve months, applies an expense ratio that depends on the industry, and qualifies you on the result. The rate spread over an A-lender is real but it is on a one- or two-year term, not a life sentence, and a B-lender approval that lets you buy this year at a lower price beats an A-lender approval two years from now.
Costs to expect at a B-lender. A lender fee, typically around 1% of the mortgage, deducted from the advance. Sometimes a broker fee, because the lender pays the brokerage less or nothing. Both are disclosed in writing before you sign. Under section 22 of Nova Scotia’s Standards of Conduct for Mortgage Brokerages Regulations, a brokerage cannot charge or collect any borrower fee until the lender has confirmed funding in writing, you have accepted the commitment in writing and you have a copy of it. What a broker costs, and when a fee applies →
The stress test applies at both. Federally regulated lenders qualify you at the greater of the contract rate plus 2% and 5.25%. Most B-lenders are federally regulated and use it too; provincially regulated credit unions have discretion.
Nova Scotia income that is self-employment in disguise
A lot of people in this province are self-employed and do not describe themselves that way. The lender will, and the file needs to be built accordingly.
- Fishery captains and licence holders. A captain with a licence and a boat is a business, usually incorporated, with seasonal revenue, large CCA on the vessel and gear, and crew shares as an expense. The add-back method matters more here than anywhere. Crew paid by share and issued a T4 are employees for mortgage purposes, with seasonal-income rules instead.
- Contractors and trades. If you invoice rather than receive a pay stub, you are self-employed, even if you have worked for the same builder for six years. A letter from the builder helps but does not replace the NOAs. Anyone who moved from a T4 job to contracting in the same trade can sometimes use the T4 history to shorten the two-year wait.
- Farms. Farm income is reported on a separate statement (T2042) with its own averaging rules and often a low or negative net after CCA and inventory adjustments. Lenders familiar with the Valley and Colchester farm files exist; most bank branches are not among them.
- Commissioned sales. Real estate agents, insurance and financial advisors and anyone on 100% commission are treated as self-employed: two years of T4A or T1 income averaged, with expenses deducted. A base salary plus commission is employment with a two-year average on the commission part.
- Gig, rental and side income. Delivery driving, Airbnb, a small rental: all self-employment or investment income, all needing two years of returns before an A-lender counts it. If it is not on the return, it does not exist for the mortgage.
Riley grew up in rural Nova Scotia and works files from Yarmouth to Sydney remotely from Bedford. Buying a boat, a farm operation or a building with five or more units is commercial lending and goes to Indi Mortgage Commercial Division.
Stated income is gone. Do not plan around it.
Before 2008 a self-employed borrower could sign a form stating their income and, within limits, be believed. Insured stated-income lending was withdrawn after 2008 and every lender now verifies income in some form. Anyone who promises you a “stated income” or “no-doc” mortgage today is describing either a B-lender bank-statement program, which is verified income read differently, or a private mortgage, which is priced on the property rather than on you and should be a short bridge, not a plan.
The practical consequence: the mortgage you can get is decided by returns you have already filed. If you are a year or two from buying, the highest-value conversation you can have is with your accountant, about how much to deduct and how to pay yourself, while there is still time for it to show up in a Notice of Assessment.
How to start
Send the two most recent Notices of Assessment. From those alone Riley can tell you whether the file is A or B, what the gross-up and add-back figures are, and roughly what price that supports at the stress-test rate on the $467,585 Nova Scotia average or anywhere else. A pre-approval then takes one to three business days once the rest of the documents are in. Buying a home in Nova Scotia → · Refinancing as a business owner →
Questions people ask
How many years of self-employment do I need for a mortgage in Nova Scotia?
CMHC recommends 24 months in business, and A-lenders want two years of Notices of Assessment to average. Under two years, some lenders will consider a file where you moved from employment into the same trade as a contractor, with the prior T4 history as support. Under a year, expect a B-lender or a larger down payment.
What income do lenders use if I am incorporated?
The salary and dividends you paid yourself, shown on your personal T1 and Notice of Assessment, averaged over two years. Some lenders will also look through to the corporation and consider retained earnings or add back the corporate net income if you own 100% and the financial statements support it. Which lender does which is the reason to use a broker on an incorporated file.
Can I get a mortgage if I owe the CRA?
Not from an A-lender until the balance is paid, and B-lenders will usually want it cleared from the mortgage proceeds on a refinance or before closing on a purchase. Lenders ask for the Notice of Assessment specifically because it shows the balance owing. CRA can register a lien against the property, which would rank ahead of the mortgage, so lenders treat arrears as a hard stop.
What is the 15% gross-up?
An insurer-permitted adjustment that lets a lender increase your declared net self-employment income by 15% to reflect legitimate deductions that reduce taxable income without reducing cash flow. On a two-year average of $60,000 net income, the lender qualifies you on $69,000. The alternative is adding back specific deductions such as capital cost allowance, which can produce a larger number when the documents support it.
Do B-lenders charge a fee?
Usually a lender fee, typically around 1% of the mortgage, deducted from the advance, and sometimes a broker fee on top. In Nova Scotia any broker fee must be disclosed in writing before you sign, and under section 22 of the Standards of Conduct regulations it cannot be charged or collected until the lender has confirmed funding in writing and you have accepted the commitment in writing.
Can I still get a stated-income mortgage?
Not in the way the phrase used to mean. Insured stated-income lending was withdrawn after 2008 and every lender now verifies income in some form. What survives is the B-lender bank-statement program, which reads your business deposits over six to twelve months instead of your tax return. It is documented income, just documented differently, and priced accordingly.
Two NOAs, one straight answer
Send the last two Notices of Assessment and, if incorporated, the last two financial statements. You get back whether the file is A or B, the income figure each lender would use, and the price it supports, in writing, within a business day.