How Canadian Lenders Assess Self-Employed Borrowers

If you don’t receive a T4 slip, traditional mortgage tools won’t reflect your real situation. Canadian lenders focus on your net income from your Notice of Assessment (NOA), specifically Line 150 on your T1 General. This is the figure they use to evaluate your eligibility — not your gross earnings or bank balance.

This calculator mirrors the approach used by major banks and CMHC-approved lenders: it calculates your qualifying income as the average of your net income over the last two tax years. No guesswork. Just realistic, lender-aligned estimates.

Why Gross Revenue Isn’t What Lenders See

You might invoice $120,000 — but after deducting $50,000 in expenses, your taxable income is $70,000. Lenders assess the $70,000. Here’s what matters most:

• Income Consistency — Two years of stable or growing net income on your NOA
• Documented Proof — CRA-issued T1 General and Notice of Assessment for both years
• Averaged Income — (Year 1 + Year 2 Net Income) ÷ 2 = Your Qualifying Base
• Debt Service Ratios — Keep GDS under 42% and TDS under 44% for optimal approval odds

Standard calculators often overestimate because they ignore deductions. Our tool helps you set accurate expectations — so you’re never surprised at closing.

Who Is This Tool For?

This calculator is designed for Canadian residents who:

• File taxes as sole proprietors, independent contractors, or freelancers
• Have two completed tax years filed with the CRA
• Want to understand their realistic mortgage range before contacting a broker
• Are buying a primary residence, vacation property, or rental investment

If you’re employed with a T4, consider our Home Sale Calculator to plan your move — or explore other financial tools on our homepage.

How to Use the Self-Employed Mortgage Eligibility Tool

This calculator helps you project your mortgage capacity using your official tax documents. Enter your NOA income, home price, down payment, and loan terms to see your estimated qualifying income, maximum mortgage amount, monthly payment, and total interest paid over time.

Follow these steps for precise results:

Step-by-Step Guide

1. Select Currency — Choose “Canadian Dollar (CAD)” to ensure alignment with local lending rules.
2. Choose Income Method — Select “Declared (2-Year NOA Average)” to match lender practices.
3. Enter Your NOA Income — Input your net income from:
   • Last Year — From your most recent T1 General and NOA (Line 150)
   • Previous Year — From your prior year’s T1 General and NOA
   The tool automatically computes your average qualifying income.
4. Input Home Value — Enter the total purchase price of the property.
5. Enter Down Payment — Specify the amount you plan to contribute upfront.
6. Set Annual Interest Rate — Use current market rates (e.g., 6.5%) for accuracy.
7. Choose Amortization Term — Common options: 25 or 30 years (longer term = lower payments).
8. Select Payment Frequency — Monthly, bi-weekly, or weekly — choose what fits your budget.
9. Click “Calculate” — Instant results appear with full breakdown.

Understanding Your Output

After calculation, you’ll see:

• Qualifying Income (est.) — Your 2-year averaged net income from NOA
• Estimated Mortgage Amount — Maximum loan based on income, down payment, and ratios
• Payment (per frequency) — Projected monthly (or bi-weekly) payment
• Total Interest (full term) — Cumulative interest cost over the life of the loan

Visualizing Your Loan Allocation

The pie chart illustrates how each payment is divided:

• Principal — Reduces your outstanding loan balance
• Interest — Cost of borrowing — higher in early years

In the first few years, most of your payment goes toward interest. Over time, more is applied to principal — helping you build equity faster.

Accessing Your Amortization Schedule

The amortization table provides month-by-month details of your loan. You can:

• Show/Hide Schedule — Click “Show Amortization Schedule” to view full payment history
• Export as CSV — Download for spreadsheets or to share with your mortgage advisor

Each row includes: Date, Payment, Principal, Interest, and Remaining Balance — perfect for long-term planning.

Pro Tips for Better Accuracy

• Use Verified Income Only — Never input projections; only use figures from your official NOA
• Include All Debts — Add car loans, credit cards, or student debt to reflect your true TDS ratio
• Adjust for Market Shifts — Update inputs if interest rates change or you plan extra payments
• Verify Documentation — Ensure your T1 General and NOA match exactly — discrepancies can delay approval

Frequently Asked Questions

Next Steps — Get Ready for Pre-Approval

• Gather Documents — Collect your last 2 years of T1 General + NOA from CRA
• Review Credit Score — Aim for 680+ for best rates (check via Borrowell or Credit Karma)
• Plan Down Payment + Closing Costs — Minimum 5% for homes under $1M CAD
• Consult a Broker — Find one experienced with self-employed applicants — they’ll help navigate lender-specific requirements

Remember: This tool provides educational estimates only. Actual approvals depend on individual lender policies, credit history, and property conditions. Always consult a licensed mortgage professional before making decisions.