Self-Employed and Buying Rentals? Here Are 3 Mortgage Options Available to My Client (and in His Case, One Beat the Big Bank by $50K in Interest)
Is your bank always your best option? Is the best option the one with the lowest rate? Let's find out.
When it comes to mortgages, many people automatically think of their bank first. It feels familiar, safe, and convenient. But here’s the truth: your bank isn’t always your best option—especially if you’re self-employed. For one thing, banks only consider the reported income on your tax returns, which may look “too low” on paper although you know you make good money. You see it flowing into your bank account every month.
On the other hand, with so many lenders, rates, and rules, how do you know you’re getting the right mortgage for your specific goals? Is the best option the one with the lowest rate?
The “best” mortgage is rarely a one-size-fits-all solution. To show you what I mean, I want to walk you through a real case study. It follows a small business owner on his journey to buying an investment property and perfectly illustrates how exploring the entire market—far beyond the big banks—can reveal a world of different options and trade-offs.
Quick Note Before We Dive In
I’m excited to share this story with you! It’s based on a real client I had the pleasure of helping. To respect their privacy, I’ve changed all identifying details, including the timeline, location, and the exact financial numbers.
Please think of this as a real-world example to illustrate what’s possible. The mortgage rates and figures mentioned are a snapshot in time and are used for educational purposes. The market is always moving, so they shouldn’t be considered a quote or formal financial advice. Every borrower’s situation is unique!
The Challenge: A Classic Entrepreneur’s Story
A client came to me with a clear goal: he wanted to buy his first rental property and start building a real estate portfolio.
Here’s a snapshot of his financial picture:
Reported Income: On his tax returns for the past two years, his net income was consistently around $75,000 per year.
Actual Cash Flow: However, his business bank statements showed deposits closer to $200,000 annually. (This is a very common and perfectly normal scenario for successful business owners!)
Down Payment: He had saved up a substantial down payment of over $150,000.
His question was straightforward: “How much can I actually borrow for an investment property?”
He asked the right person because I was going to show him the full landscape of possibilities, not just how much.
The Options: Looking Beyond the Big Banks
Instead of just checking one option, I scanned the entire Canadian mortgage market. For a homebuyer, it’s crucial to understand that there are three main types of lenders, each with its own rulebook.
The Big Banks: These are the household names. They offer a wide range of products but often have the most rigid, black-and-white rules for verifying income.
Monoline Lenders: These are mortgage specialists. They don’t offer chequing accounts or credit cards; they onlydo mortgages. With lower overhead costs (no physical branches), they often offer some of the most competitive interest rates. You can only access them through a mortgage professional.
Alternative Lenders: These lenders are experts at working with borrowers who don’t fit the traditional mold. They have special programs designed for self-employed individuals that allow them to consider your real cash flow, not just your declared income.
After a deep dive, I presented my client with three distinct options based on his specific financial picture.
The “Best” Option Is the One That Achieves Your Goal
Looking at that table, what stands out? Maybe it’s the super-low interest rate from the monoline lender. Or perhaps it’s the massive borrowing power offered by the alternative lender.
Here’s the key insight: the “best” mortgage is simply the one that gets you the keys to the property you want.
My client could now see the full picture and make a strategic decision.
Scenario 1: The Lowest Rate is Priority #1. If his goal was to find a property under $600,000, the Monoline Lender was the champion. He’d secure the lowest rate and the lowest monthly payment.
Scenario 2: The Perfect Property is a Bit Pricier. What if he found the ideal rental for $650,000? The Monoline option would be off the table. Here, the Major Bank would be the perfect solution even with a slightly higher interest rate, unlocking the funds needed to close the deal.
Scenario 3: The Vision is a Larger Investment. What if he wanted to buy a duplex or a triplex for over $1,000,000? Neither the Big Bank nor the Monoline could make that happen. This is where the Alternative Lender becomes the hero by recognizing his true business cash flow as qualified income to make a much larger investment possible.
By seeing all three paths, my client went from uncertainty to empowerment. He could now go house-hunting with a crystal-clear understanding of his budget and his options.
Heads Up for Investors: The rates you see advertised are often for primary (owner-occupied) homes, but for investors, the calculation is slightly different. Lenders consider rental properties a higher risk, so they apply a rental rate premium (e.g., the rates in the three scenarios above incorporates rental rate premiums). For any investment property, expect your mortgage rate to be roughly 0.10% to 0.50% higher than what you’d get for a home you live in yourself. This is a standard practice and a critical line item when calculating your potential return on investment.
You can read more on Occupancy and Property Use.
The Final Decision: The Perfect Fit
Armed with this knowledge, he confidently searched for properties. In the end, he found a fantastic investment property in Southwestern Ontario for a price in the mid-$500,000s.
Since the price was well within the Monoline lender’s limit, the choice was clear. We secured the best rate available and got him a swift approval, effectively saving him more than $50,000 in interest over the Big Bank’s product for the whole 30-year amortization period. He is now the proud owner of a cash-flowing asset.
Key Takeaways That Might Surprise You
1. Banks Aren’t Always the Best (or Cheapest) Option
When it’s time for a mortgage, where does your mind go first? For most people, it’s the bank they already deal with. It makes sense—you see their commercials, you walk by their branches, and you know the name. It feels familiar and safe. For many, the convenience of keeping everything under one roof is worth it, even if the rate isn’t the absolute lowest (assuming you are aware of that).
But there’s a huge part of the mortgage world that many homebuyers never see. It’s where you’ll find monoline lenders.
Think of them as mortgage specialists. They do one thing and one thing only: home loans. 🏡 They don’t have expensive downtown branches to maintain or massive marketing budgets for chequing accounts and credit cards. Because their overhead is much lower, their interest rates are often better than the big banks, just like the low ~4.5% rate my client secured.
Now, you’ll definitely see banks advertise very competitive rates from time to time. The catch is that those headline-grabbing numbers are often reserved for a very specific type of borrower and may only be for a short promotional period. Monoline lenders, on the other hand, offer fantastic rates consistently. They are just as safe and regulated as the big banks; the main difference is you can only get access to them through a mortgage professional like me.
The mortgage market changes every single day. If you’d like to follow the latest rates from a wide variety of lenders, you can read The Latest Canadian Mortgage Rates and Trends.
2. The Lowest Rate Isn’t Everything (or the Holy Grail)
Everyone gets excited about interest rates, and it’s easy to see why. But the rate is only one piece of the puzzle. A mortgage with a rock-bottom rate is completely useless if the lender won’t approve you for the amount you need to actually buy the property. The real goal is to find the most suitable mortgage product (which is a combination of rate, loan amount, eligibility, flexibility, and other features) that gets you the keys to your dream home.
Here’s something most people forget: a mortgage isn’t forever.
The mortgage you get today is a tool—it’s the stepping stone that helps you buy your property based on your financial situation right now. It’s the best solution to get you in the door.
My job doesn’t end when you get the keys. Think of me as your mortgage partner for the long haul. In a few years, about six months before your term is up for renewal, we’ll reconnect. By then, your income may have grown, and your credit score might be even stronger. We’ll take that improved financial picture and shop the entire market all over again to find an even better product.
Your first mortgage gets you the home; your next one can improve your wealth. I’ll be with you every step of the way.
3. You Don’t Have to Navigate This Alone.
Imagine how much time it would take to book appointments, visit, and apply at three different banks. That’s at least a day or two of your time, not to mention multiple hits on your credit score (each application can lower it).
When you work with me, you just need to fill out one application. I’ll do the legwork for you, accessing dozens of lenders (including the broker-only ones) with a single credit check.
Unlike bank staff, my loyalty isn’t to any specific bank; it’s to you.
My working principle is to do my best to find at least 2 to 4 of the most suitable options available from different lenders for your specific situation so that you can make better-informed decisions.
Your Journey to Your Next Home
Your financial story is unique. Whether you’re self-employed, new to Canada, or planning your next investment, there’s a mortgage solution built for you. You just need a guide to help find it.
If you’re ready to see what your true options look like, let’s have a conversation.