Self-Employed? Do Lenders Use Gross or Net Income?

Do mortgage lenders use your gross or net income if you are self-employed? In most cases they start from your net income: what is left after business expenses, as shown on your personal tax return and Notice of Assessment. Gross revenue is rarely the qualifying figure. What can change the number is how the lender and any mortgage insurer treat that net figure: CMHC allows a 15% gross-up for sole proprietors and partnerships, or an add-back of eligible deductions, and some business-for-self programs accept other evidence of income. Each lender decides how it reads your file, so the same tax return can produce different results at different lenders. CMHC, self-employed

General information as of November 10, 2026. Lender and insurer policies change, and nothing here is tax advice.

What is the difference between gross and net business income?

The Canada Revenue Agency describes gross income as "your total income before you deduct any expenses." CRA Guide T4002, Chapter 1 You then deduct reasonable expenses you incurred to earn that income, and Form T2125 carries the result through to your net income (loss). CRA Guide T4002, Chapter 3 Self-employment income is reported on lines 13500 to 14300 of your return. CRA, sole proprietorships and partnerships

So a consultant who invoices $150,000 and spends $90,000 on staff, rent, a vehicle and equipment has $60,000 of net business income. That $60,000 is the starting point most lenders will look at, not the $150,000.

Why do lenders start from net income?

Because net income is the figure that has been reported to and assessed by CRA. CMHC's self-employed guidance lists the Notice of Assessment together with the T1 General as documents to determine the source of income, along with the statement of business activities (T2125). CMHC, self-employed

The qualifying ratios then use that income. CMHC limits the gross debt service ratio (housing costs) to 39% of income and the total debt service ratio (housing plus other debts) to 44%. CMHC, calculating GDS and TDS The word "gross" in those ratio names refers to income before personal income tax, not to business revenue before expenses. That mix-up causes a lot of confusion for self-employed buyers.

Write-offs therefore cut both ways. Every dollar of expense lowers your tax, and it usually lowers the income a lender can use too. If you plan to buy in the next year or two, raise that trade-off with your accountant before filing, not after. Only your accountant can tell you what is right for your taxes.

Can a lender add back some of my expenses?

Sometimes, within program rules. CMHC says self-employment income for sole proprietorships or partnerships may be grossed up by 15%, or lenders can use an "add back" approach of eligible deductions instead. CMHC, self-employed Two points matter here:

• It is one approach or the other under that framework, not both stacked together.
• "Eligible" is narrower than "everything I wrote off." Which deductions a lender will add back, if any, varies by lender and must be supported by your records.

Incorporated owners are a different case. Salary and dividends you actually paid yourself show up on your personal return. Money left inside the corporation is not automatically your personal income, and only some lender programs consider it. Our self-employed mortgage page covers how salary, dividends and retained earnings are reviewed.

What if my net income is too low to qualify?

Then you have a few routes to compare, none of them automatic:

• Business-for-self (BFS) programs. Sagen's Business for Self (Alt. A) program is aimed at self-employed borrowers who cannot provide traditional income verification. Its published criteria include at least two years of business-for-self tenure, stated income that is "reasonable based on the length of operation, type and size of the business", and a purchase limit of 90% loan-to-value. Sagen, Business for Self Whether a lender offers such a program to you is a separate decision.
• A larger down payment. Borrowing less lowers the payment the ratios have to support.
• Waiting for a stronger tax year. Lenders generally look at your filed and assessed history, so a better year helps only once it is filed.
• Alternative lenders. Some lenders outside the major banks use different income evidence, usually at a higher cost. Read our B-lender mortgage page before going down that road, and make sure you understand the exit plan.

Private lending is a separate category that this article does not cover.

Does the stress test apply to self-employed borrowers?

Yes, in the same way as for salaried borrowers. For federally regulated lenders, the qualifying rate is the greater of your contract rate plus 2% or 5.25%. OSFI, minimum qualifying rate CMHC applies the same test to insured mortgages. CMHC, calculating GDS and TDS Your qualifying income has to carry the payment at that higher rate.

Ottawa example: how much does the income figure matter?

Illustration only, not a real client. Round numbers, rates assumed for the example, not a forecast.

Sam is a sole proprietor in Orléans. Gross revenue is $150,000 and expenses are $90,000, so net income is $60,000 in each of the last two years. Assumptions: no other debts, property tax of $400 a month, heating of $100 a month, a 25-year amortization, and a qualifying rate of 6.5% (an assumed 4.5% contract rate plus 2%). We use the 39% GDS limit only.

• Net income of $60,000: maximum housing cost $1,950 a month, supporting a mortgage of about $216,000.
• Net income with a 15% gross-up, $69,000: maximum housing cost about $2,243 a month, supporting about $260,000.
• Gross revenue of $150,000: not used by lenders as qualifying income.

The gross-up, where a lender applies it, adds roughly $44,000 of borrowing room in this example. Treating the full $150,000 of revenue as income would suggest more than $650,000, which is not how lenders assess the file. Payments use Canadian semi-annual compounding. Try your own numbers in the GDS/TDS calculator or the affordability calculator.

Is this a fit for a mortgage review right now?

A review is most useful when you have at least two filed tax years in the same line of work, your returns are assessed, and personal and business taxes owing are paid or under control. CMHC recommends at least 24 months in business or in the same line of work, though it lists factors that may support a shorter history. CMHC, self-employed

It is usually too early if you started your business a few months ago with no related prior work, if your returns are not filed, or if you are hoping a lender will use revenue instead of income. In those cases, the better first step is often to file, talk to your accountant about the next tax year, and come back with the paperwork. This site also does not cover commercial mortgages or properties outside Ontario.

Next steps

1. Pull your last two Notices of Assessment and T1 Generals, and find your net business income for each year.
2. Ask your accountant which of your expenses are non-cash or one-time, and how planned write-offs this year could affect a mortgage application.
3. Run your net income through the GDS/TDS calculator. If the answer is close, you can request a file review and bring both years of tax documents.

Sources

• CMHC, Self-employed (mortgage loan insurance). No modification date shown. Accessed November 10, 2026.
• CMHC, Calculating GDS / TDS. Published March 31, 2018. Accessed November 10, 2026.
• Sagen, Business for Self (Alt. A). No modification date shown. Accessed November 10, 2026.
• OSFI, Minimum qualifying rate for uninsured mortgages. Modified January 29, 2026. Accessed November 10, 2026.
• CRA, Guide T4002, Chapter 1: General information. Page dated April 16, 2026. Accessed November 10, 2026.
• CRA, Guide T4002, Chapter 3: Expenses. 2025 edition. Accessed November 10, 2026.
• CRA, Sole proprietorships and partnerships. Page dated August 31, 2026. Accessed November 10, 2026.