For many self-employed professionals, business owners, and entrepreneurs, tax returns tell only half the story.
To minimize tax liability, savvy business owners often leverage deductions, write-offs, and reinvestments. But when it comes time to apply for a traditional mortgage, those same tax strategies can make your personal income look entirely different on paper than it does in reality.
Add major life transitions, like navigating a divorce into the mix, and securing traditional financing can feel like running into a brick wall.
Recently, we helped a client overcome these exact roadblocks to secure a beautiful new home. Here is a look at how alternative (ALT) lending provided the flexibility she needed.
The Challenge:
Our client was a resilient, self-employed business owner going through a fresh start post-divorce. She managed two completely different ventures:
- An established corporation with a 30-year track record.
- A newer sole proprietorship operating for 2 years
Because she strategically reinvested back into her companies, the income declared on her personal tax returns simply wasn’t high enough to qualify for a conventional mortgage amount.
However, looking strictly at her tax returns missed the bigger picture. She brought serious financial strength to the table, including a significant amount of liquid capital readily accessible in investments. Traditional retail banks follow under stricter guidelines and require certain paperwork; therefore they had to pass.
The Solution: Common Sense Lending for Entrepreneur’s
To structure a successful outcome, we utilized:
- 12 Months Business Banking Statements: by reviewing a full year of statements across both of her businesses, we were able to accurately capture her true, ongoing cash flow rather than relying solely on the net taxable income line.
- A Specialized Net Worth Program: We leveraged her strong liquid investment portfolio to back up her financial profile, bridging the gap that her tax returns left behind.
The Result: A Very Happy Home Owner!
Instead of being boxed out of the housing market which could have her in the position of restructuring her taxable income resulting in paying higher taxes and waiting another two tax seasons, to fit traditional guidelines, she secured her new home, and a seamless path forward.
Is Traditional Mortgage Lending Standing Between You and Your Next Home?
If you’re self-employed, run multiple streams of income, or find that your tax returns don’t reflect your true financial capacity, traditional banks might not be your only option.
Talk to a Mortgage Sister today to discuss how a custom alternative lending solution can make your homeownership goals a reality.
Mortgage Sisters West- we love what we do!
We are mortgage brokers who serve all of Alberta, with a focus on our local Edmonton, Sherwood Park, St. Albert, Fort Saskatchewan, Spruce Grove, Stony Plain, Beaumont, Leduc and surrounding areas!
We are mortgage brokers franchised with our National Brokerage Mortgage Architects – part of the DLC Group of Companies, and can broker your mortgage in other provinces as well. We would love to work with you!
