Incorporated in Ontario? How Your Business Structure Affects Your Mortgage Approval
If you own an incorporated business, your tax return is built to keep income low. Your mortgage application needs to do the opposite. The way you pay yourself, and how a lender reads it, is often the difference between an approval and a decline.
Salary, dividends, or retained earnings
Lenders treat each form of compensation differently. T4 salary is the simplest to qualify on. Dividends usually need a two-year history. Retained earnings inside the corporation are harder for a bank to use, but several lenders will consider them when the file is presented with proper accountant-prepared financials.
Add-backs that raise your usable income
Many business expenses can be added back to your qualifying income, such as capital cost allowance, certain one-time costs, and a portion of expenses that are not truly recurring. A well-prepared file surfaces these instead of leaving them buried in a return.
Documents that make the difference
Expect to provide two years of T1 Generals and Notices of Assessment, two years of business financial statements, recent business bank statements, and proof the company is active and in good standing. The cleaner and more complete the package, the more lenders will compete for the file.
Why presentation matters
Two borrowers with identical businesses can receive very different answers depending on how the file is structured and explained. Matching your corporate structure to the right lender policy is the work, and it is where strategy turns a complicated file into a clear approval.