Monica Peckford
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Claiming Business Expenses and Its Impact on Mortgage Approval
October 22, 2025
Self-employment is booming across Canada, from freelance designers and consultants to small business owners. While being your own boss brings plenty of freedom, it also adds layers of complexity when it’s time to apply for a mortgage. One area that often causes confusion is how claiming business expenses can impact your chances of getting approved.
On one hand, writing off expenses helps lower your tax bill. On the other hand, it also reduces your net income. And that’s exactly what lenders look at when deciding how much they’ll let you borrow. In this guide, we’ll break down how your expense claims can affect your mortgage eligibility and share practical tips to help you strike the right balance between saving on taxes and qualifying for the home you want.
Want to dive deeper? Check out our guide on understanding the mortgage approval process.
What Are Business Expense Deductions?
If you’re self-employed, you’re allowed to deduct certain costs from your total income to reduce what you owe in taxes. These deductions are fully backed by the Canada Revenue Agency (CRA), and they’re a smart way to manage your business finances.
Here are some common expenses you can write off:
Part of your rent or home bills (if you work from home)
Car-related costs like gas, insurance, or repairs
Travel and hotel stays for work
Advertising, marketing, or software subscriptions
Fees for lawyers, accountants, or industry memberships
Tools, inventory, and other day-to-day supplies
While all of these can help reduce what you owe in taxes, they also reduce your reportable income, and that’s what mortgage lenders care about.
Planning to apply soon? Make sure you’ve reviewed your finances with our steps to take before applying for a mortgage.
The Mortgage Approval Process for Self-Employed Canadians
When you’re self-employed, mortgage lenders don’t just look at what you made last year, they want to see a stable income pattern. And instead of focusing on your gross income (before expenses), they zero in on your net income: what’s left after all those deductions.
Here’s what they pay attention to:
Gross income: Your total earnings before expenses
Net income: Your actual take-home (used by lenders)
Two-year average: Most lenders average your last two years of net income
Let’s say you brought in $100,000 but claimed $40,000 in business expenses. Your net income is now $60,000, and that lower number could drastically reduce the mortgage amount you’re approved for.
Curious how this affects your buying power? Try our affordability calculator and don’t miss the impact of interest rates on mortgage payments.
The Double-Edged Sword: Lower Taxes, Lower Mortgage Eligibility
Deducting expenses is a smart move come tax season, but it’s a bit of a double-edged sword. The more you write off, the less you show as income, meaning you may qualify for a smaller mortgage.
For example, if a graphic designer deducts their rent, a new laptop, and monthly subscriptions. Sure, they save $10,000 in taxes, but they also lose out on potentially $100,000 in mortgage room.
The key is balance.
Don’t go overboard with deductions if you’re planning to buy soon.
Be aware of which write-offs reduce the income lenders use.
Understand that a good tax strategy isn’t always a good mortgage strategy.
Here’s a self-employed mortgage approval tip: if homeownership is a goal in the near future, start shaping your finances in a way that makes sense to both the Canada Revenue Agency (CRA) and your mortgage lender.
Documentation That Lenders Want to See
Getting a mortgage when you’re self-employed means more paperwork, but being prepared can make all the difference. Here’s a list of what most lenders will want to see:
Your last two T1 General tax returns
CRA-issued Notices of Assessment (NOAs)
Financial statements for your business
Business bank statements (6 to 12 months)
HST (harmonized sales tax) and GST (goods and services tax) registration, if applicable
Invoices or contracts that show steady work and income
Need more details? Visit our article on understanding the mortgage approval process, or check out alternative lenders.
How Different Lenders Assess Business Expenses and Income
Not all lenders view your finances the same way. Here’s how they typically break down:
A-Lenders (Banks and Credit Unions):
Stick to traditional rules
Want full documentation
Use your net income average over two years
B-Lenders (Alternative Lenders):
More flexible with paperwork
Might accept stated income backed by bank statements
Offer options when big banks say no (but often at higher rates)
If you’ve claimed a lot of deductions and your net income looks low, a B-lender might be the bridge you need.
Learn more about alternative lenders or explore our guide on fixed vs. variable mortgages.
Strategies to Improve Your Mortgage Application
Think Ahead About Deductions: If buying a home is in the cards within the next two years, scale back on aggressive write-offs to help raise your reported income.
Keep Business and Personal Finances Separate: Dedicated accounts make it easier for lenders to evaluate your earnings and spending.
Strengthen Your Credit Score: Even if your income isn’t high, a solid credit profile can still work in your favour.
Consider a Co-Signer: A partner or family member with a salaried job can give your application a serious lift.
For more on how credit affects your rate, see the impact of credit score on mortgage rates.
Planning Ahead: When to Claim and When to Hold Back
If you’re thinking about buying in the near future, timing your deductions can make a huge difference. Talk to your accountant before making any big claims that could reduce your net income too much.
For example, the $15,000 equipment upgrade might be worth delaying until after your mortgage closes, especially if it brings your income below lender requirements.
For flexible borrowing options, explore home equity solutions (HELOC) and find mortgage refinancing explained.
Refinancing: A Second Chance to Leverage Business Expenses
If your deductions have already affected how much you can borrow, refinancing could be a smart move. Instead of buying a new place, you tap into the equity in your current home to:
Pay off high-interest debt
Fund business needs
Consolidate loans or boost your credit
This can be a great option for self-employed folks who need funds without waiting years for their income profile to bounce back.
Find more details in the mortgage refinancing explained.
Common Mistakes to Avoid
- Claiming too many deductions right before applying. It might be tempting to maximize your deductions, but doing so right before a mortgage application can seriously reduce how much you qualify for. Lower reported income means less borrowing power.
- Mixing business and personal expenses. Mixing the two can make it tough for lenders to assess your income. It also raises red flags and could lead to parts of your income being excluded altogether.
- Skipping out on the documents lenders need. Lenders need clear, consistent documentation to approve your mortgage. Missing tax returns, assessments, or business statements can delay or derail your application.
- Working with brokers who don’t understand self-employment income.
Not all brokers understand the unique challenges of self-employed borrowers. Make sure you’re working with someone who knows how to navigate income that isn’t straight off a pay stub.
Business deductions are a powerful financial tool, but when you’re also aiming to buy a home, they require careful planning. Since your reported income plays a major role in mortgage approval, knowing how your claims affect your borrowing potential is essential.
Work closely with both your accountant and a mortgage broker who understands the self-employed landscape. Together, you can build a strategy that supports both your business growth and your path to homeownership.
Negotiating a Better Renewal Rate with a Powell River Mortgage Broker
March 11, 2025
Renewing your mortgage is a crucial financial decision that can significantly impact your monthly budget and long-term financial well-being. With mortgage renewal rates fluctuating and various options available, working with a Powell River Mortgage Broker can help you secure a better renewal rate and save thousands over the life of your loan.
How Does Mortgage Renewal Work? Mortgage renewal is the process of signing a new mortgage contract with your lender for another term once your current mortgage term ends. This involves selecting new terms and conditions, including the mortgage interest rate, term length, and payment schedule that best suit your financial situation.
Your lender will typically send a renewal offer several months in advance. While accepting this initial offer may seem convenient, taking the time to research and negotiate can often result in better rates and terms. A Powell River Mortgage Broker can help you evaluate your options and negotiate a better renewal rate to reduce your overall interest payments.
The renewal process generally begins about 120 days before your current mortgage term expires. During this window, you can assess your financial situation, research current mortgage renewal rates, and shop around for competitive offers from other lenders. If a better deal is available, you may consider switching lenders to maximize your savings.
Can I Renew My Fixed-Rate Mortgage Early? Many lenders offer early renewal options, allowing you to lock in new mortgage renewal rates and terms up to 120 days before your existing term expires. This can be advantageous if current mortgage renewal rates are lower than those anticipated at the start of your original term. By locking in a new rate early, you can potentially save money on interest payments. A Powell River Mortgage Broker can help you navigate early renewal options and secure the best terms.
Do Banks Check Credit for Mortgage Renewal? Banks may check your credit score during the mortgage renewal process, though it is not always mandatory. A strong credit score can qualify you for better rates, while a lower score may limit your options. Maintaining good credit and working with a Powell River Mortgage Broker can enhance your ability to negotiate a favorable renewal rate.
What Happens If You Don’t Renew Your Mortgage? In Canada, failing to renew your mortgage typically results in it converting to an open mortgage. While this allows you to pay off the balance at any time without penalties, it usually comes with a higher interest rate compared to a closed mortgage. To avoid unnecessary costs, it is advisable to renew or refinance with better terms. A Powell River Mortgage Broker can assist in finding the best solution for your situation.
How to Negotiate a Better Mortgage Renewal Rate Negotiating a better mortgage renewal rate can lead to significant savings. Here are some key mortgage renewal tips:
- Start Early: Begin the renewal process at least 120 days before your mortgage term expires.
- Check Your Credit: Review your credit report and work on improving your score if needed.
- Use a Mortgage Renewal Calculator: Estimate potential costs and savings under different scenarios.
- Compare Mortgage Options: Choose terms that align with your financial goals.
- Negotiate with Your Current Lender: The initial renewal offer may not be the best available rate.
- Explore Other Lenders: Competitive offers from different lenders can serve as negotiation leverage.
- Consult a Powell River Mortgage Broker: A broker has access to multiple lenders and can help secure the best rates and terms.
What Happens If Your Mortgage Renewal is Denied? If your mortgage renewal is denied, consider the following steps:
- Understand the Reason: Contact your lender to determine why the renewal was denied.
- Improve Your Credit: Pay off outstanding debts and ensure timely payments.
- Consider Refinancing: Alternative lenders may offer more flexible criteria.
- Work with a Powell River Mortgage Broker: Brokers can connect you with lenders willing to offer a suitable mortgage product.
- Explore Co-Signing Options: A co-signer with a strong financial profile can improve your chances of approval.
- Consider Selling: If no other options are viable, selling your property might be necessary to avoid foreclosure.
Can a Bank Deny Mortgage Renewal in Canada? Yes, a bank can deny mortgage renewal in Canada under certain circumstances, including:
- Significant negative changes in your credit score.
- Reduced income or job loss.
- Breach of original mortgage agreement terms (e.g., missed payments).
A Powell River Mortgage Broker can help you assess your financial standing and explore alternative lending options if needed.
Preparing for Mortgage Renewal Shock As mortgage renewal approaches, it’s important to be prepared for potential changes in interest rates—what is commonly referred to as “mortgage renewal shock.” Higher rates can lead to increased monthly payments, making financial planning essential. Consulting a Powell River Mortgage Broker can provide valuable insights and assistance in negotiating a better renewal rate.
When it comes to Powell River Real Estate and mortgage renewals, working with an experienced mortgage broker can make a significant difference. Whether you’re renewing, refinancing, or switching lenders, expert guidance ensures you get the best possible mortgage terms for your financial future.
Selling your home in Winter
February 20, 2025
Selling Your Home in the Winter – Powell River Real Estate Insights
Many homeowners assume the real estate market slows down in winter, but if you're considering selling, there's no need to wait. Powell River real estate trends indicate that winter can be an advantageous time to sell, offering unique benefits over the busy spring market. With fewer homes listed and highly motivated buyers on the lookout, listing your home now could lead to a quicker sale and a better price.
Less Competition, More Visibility
Winter means fewer listings, which works in your favor as a seller. During peak seasons like spring and summer, your property competes with countless others. In contrast, winter buyers searching for Powell River real estate have fewer options, making your home stand out. If priced correctly and well-presented, your listing will attract more attention. Ensure your photos reflect the season—buyers will connect more with a cozy, well-maintained winter home than a summer lawn scene in January.
Winter Buyers Are Serious
Do homes sell in winter? Absolutely! Buyers who shop in colder months are typically serious—whether relocating for work, taking advantage of tax benefits, or facing a major life change. Unlike casual browsers in the spring, winter buyers are ready to act quickly, leading to faster offers and smoother negotiations. Ensure your home is easily accessible despite the weather; clear walkways and driveways make a great first impression.
Showcasing Your Home’s Winter Strengths
Winter puts a home’s functionality to the test, and if yours stands up well, that’s a selling point. A warm, dry, and inviting space will appeal to buyers looking for comfort. Features like energy-efficient windows, a reliable heating system, and a well-maintained roof make a difference. In Powell River real estate, homes that are move-in ready and winter-proof often sell faster. Address maintenance issues like drafts or inconsistent heating to make your home more attractive.
Create a Cozy, Inviting Atmosphere
Winter’s natural chill provides the perfect opportunity to highlight your home’s warmth. Use soft lighting, warm blankets, and subtle seasonal décor to enhance the ambiance. A crackling fireplace can be a major selling point. Keep decorations minimal—buyers should see the home, not just holiday décor.
Faster Sales & Financial Benefits
Listing in winter can also mean quicker transactions. Since fewer homes are on the market, buyers act fast, and real estate professionals—agents, inspectors, and appraisers—often have more availability, making the process smoother. Financially, selling before the year's end could offer tax advantages, including offsetting capital gains. Consulting a tax professional can help you maximize potential deductions related to the sale.
Make the Most of Winter with Powell River Real Estate
Selling in winter doesn’t have to be a challenge—it can be a strategic move. At Powell River Real Estate, we understand the unique opportunities this season brings. Whether it’s attracting serious buyers, showcasing your home’s best features, or ensuring a seamless transaction, we’re here to help. Contact your local Powell River real estate expert today to make the most of your winter sale!
What is a VTB Mortgage?
February 20, 2025
Securing a traditional mortgage can be challenging, especially with rising real estate prices, higher interest rates, and stricter lending requirements like Canada’s mortgage stress test. For buyers with poor credit, no down payment, or a history of bankruptcy, being approved by traditional lenders may feel nearly impossible.
This is where a Vendor Take-Back (VTB) mortgage can be an excellent alternative. A VTB allows you to bypass some of the rigid criteria of banks by negotiating directly with the seller, who acts as the lender. This arrangement offers unique flexibility and the opportunity to purchase a home that might otherwise be out of reach.
How Does a VTB Mortgage Work?
In a typical mortgage arrangement, buyers secure financing through a bank. They provide a down payment, and the bank covers the rest. Once the sale closes, the seller gets paid, and the buyer owes the bank the loan amount plus interest.
In a VTB mortgage, the process is different. Instead of a bank, the seller lends a portion (or all) of the purchase price to the buyer. The property serves as collateral for the loan. This arrangement is often used when the seller owns the property outright, without an existing mortgage.
The buyer and seller negotiate the loan terms—such as the down payment, interest rate (often higher than bank rates), and repayment schedule. Payments are made directly to the seller, creating an ongoing financial relationship between the two parties.
What Are the Benefits of a VTB Mortgage?
For Buyers:
- Flexible Terms: Buyers can negotiate terms that fit their financial situation, such as a lower down payment or customized repayment schedules.
- Access to Financing: Buyers with poor credit or limited financial history can secure financing they might not qualify for through a bank.
- Quicker Transactions: VTB arrangements often bypass the lengthy approval process required by banks, leading to faster closings.
For Sellers:
- Steady Income Stream: Instead of a lump sum, sellers receive regular payments, providing consistent cash flow.
- Potential Tax Benefits: Spreading payments over time can reduce the seller’s immediate tax burden and potentially keep them in a lower tax bracket.
- Broader Pool of Buyers: Offering VTB financing can attract buyers who might otherwise struggle to secure traditional loans.
Examples of Customization in VTB Mortgages
One of the key advantages of VTB financing is the ability to tailor the repayment schedule:
- Interest-Only Payments: Buyers may make interest-only payments initially, reducing upfront costs.
- Seasonal Adjustments: Buyers with variable incomes, such as seasonal business owners, can negotiate higher payments during peak seasons and lower payments during slower times.
Why Involve a Real Estate Agent?
Navigating a VTB mortgage can be complex, as it involves legal, financial, and logistical considerations. A professional real estate agent can:
- Help buyers find properties with VTB financing options.
- Guide sellers on structuring a VTB arrangement that meets their goals.
- Ensure all terms are clearly documented to protect both parties.
If you’re interested in exploring VTB mortgages I can guide you. I've been a Mortgage Broker for 23 years and I am now also licensed as A Realtor too.
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