When you’re applying for a mortgage in Canada, one of the key steps is verifying your income to determine how much you can afford to borrow. Lenders need a clear picture of your financial stability, which means understanding which income sources they consider acceptable for mortgage qualification. Here’s what you need to know about the different types of income that can be used when securing a mortgage in Canada.

1. Employment Income

Regular work salary or wages from an employer are the most common income sources considered. Typically, lenders prefer applicants with steady employment and at least 2 years of consistent income, though some may accept shorter periods if your job history is strong.

  • Full-Time or Part-Time employment.
  • Permanent or Contract positions, provided they are stable and predictable.

Documentation needed:

  • Recent pay stubs
  • Employment letter or verification from your employer
  • T4 slips and Notices of Assessment for self-employed applicants

2. Self-Employment Income

Self-employed individuals can qualify for a mortgage, but lenders look for verifiable income over time. Typically, 2 years of self-employment income proof is required.

  • Tax returns and Notices of Assessment from CRA
  • Financial statements prepared by an accountant

3. Rental Income

If you own rental properties, the income generated, both current and projected, can be considered if properly documented.

  • Lease agreements and rent receipts
  • Tax returns showing rental income

4. Investment Income

Interest, dividends, and capital gains can be factored into your income if they are consistent and sustainable.

  • Bank statements showing interest earned
  • Investment income statements or dividend statements

Note: Lenders may consider the stability and likelihood of ongoing investment income.

5. Government Benefits and Pensions

Ongoing government sources of income are considered, including:

  • Canada Pension Plan (CPP)
  • Old Age Security (OAS)
  • Employment Insurance (EI)
  • Disability benefits

Documentation: Benefit award letters and payment history.

6. Alimony and Child Support

Payments received from alimony or child support are considered stable income if they are court-ordered and can be documented.

7. Other Income Sources

Additional sources that may be considered include:

  • Bonuses or commissions (if consistent)
  • Income from side businesses or freelance work (with proper documentation)
  • Workers’ Compensation Benefits

What Doesn’t Count?

Some income sources are typically not considered by lenders, such as:

  • Gambling or gaming income (unless long-term and verifiable)
  • Unemployment benefits (unless ongoing)
  • Non-sustainable one-time income or gifts

Lenders want to see stable, predictable income streams that demonstrate your ability to comfortably make mortgage payments. Providing thorough documentation and a clear history of your income sources can improve your chances of approval and potentially secure better mortgage terms.

Contact me today to discuss your income sources and how they impact your mortgage options in Canada!