Business for Self (Alt. A)

This program is designed for self-employed borrowers who are unable to provide traditional income verification but have a proven 2 year history of managing their credit and finances responsibly. Eligible borrowers typically own a small size business for a minimum of two years, which can be confirmed via a third -party arm’s length document. In addition, the borrower is required to declare their annual income and annual business revenue, which should be reasonable based on the industry, length of operation and type of business.

Acceptable Loan Purpose and Applicable Loan-to-Value Limits

Purchase Transactions

• 90% LTV

Loan Security

• First and second mortgages

Eligible Properties

• Maximum 4 units where 1 unit must be owner occupied
• New construction covered by a Lender approved New Home Warranty Program*
• Existing resale properties
• Readily marketable residential dwellings, located in markets with demonstrated ongoing re-sale demand
• Estimated remaining economic life of the property should be a minimum of 25 years
• In addition, for 3 and 4 units, the property must meet the following criteria:
  • Municipal zoning
  • Fully self-contained units

_{*For new construction properties in the territories (Yukon, Northwest and Nunavut Territories) where New Home Warranty is not an option, Lenders must obtain either the occupancy permit or a third-party report from a qualified professional such as: an inspector, architect or engineer. The qualified professional must carry the appropriate liability insurance and confirm construction is completed in compliance with applicable bylaws and regulations.}

Maximum Property Value

• > 80% LTV: Property value must be less than $1,500,000
• ≤ 80% LTV: Property value must be less than $1,000,000

Qualifying Terms and Interest Rates

• Fixed, standard variable, capped variable and adjustable rate mortgages are permitted.
• Maximum interest rate term of 25 years.
• The qualifying interest rate is the greater of the contract rate plus 2 % or 5.25 %.

Amortization Options

• Up to 30-year amortization
• For greater than 25-year amortization LTV must be >80%, and one of the following applies.
  • A minimum of one applicant must meet first-time homebuyer’s criteria; OR
  • Purchase of a new constructed home.

Premium Rate

The premium payable will be the lesser of the premium as a % of the total new loan amount or the premium as a % of the top -up portion on the additional loan amount (if existing insured) based on the rates below:

The mortgage insurance premium is non -refundable, paid at the time of closing and may be added onto the mortgage.

Borrower Qualification

Income and Employment

• Minimum of two (2) years business-for-self tenure.
• The self -employed borrowers stated income should be reasonable based on the length of operation, type and size of the business, and should be able to service the required mortgage as per the GDS / TDS guidelines.
• Reasonableness of the stated income should also be reflective of the personal financial profile of the borrower.
• Lender to provide the line 15000 (line 150 prior to 2019) from the borrower(s) most recent years’ Notice of Assessment (NOA).

Credit

• >80% LTV Minimum credit bureau score of 650 is recommended.
• ≤ 80% LTV: At least one applicant should have a minimum recommended credit bureau score of 680.
• Minimum 2 trade lines with at least two (2) years history.
• No mortgage, instalment or revolving credit delinquencies appearing on the credit bureau in the past 12 months.
• No reported defaults on residential mortgages for the past 7 years.
• No previous bankruptcy.

Down Payment

• Minimum 5% of the down payment from the borrower’s own savings. The remainder may be gifted from an individual related to the borrower through a familial or legal relationship.
• Qualified home buyers may use traditional down payment sources including personal savings, non-repayable gift from an individual related to the borrower through a familial or legal relationship, proceeds from sale of property.

Additional Criteria

• Borrowers with commission income are ineligible.
• Lender to ensure borrower(s) have no tax arrears.
• All applicants used to qualify must occupy the property (One unit must be owner occupied).
• Spousal guarantors acceptable.
• Borrowers are permitted one (1) Sagen insured Business for Self (Alt. A) Program mortgage.

Business Information Requirements

Lender to provide the following information in the notepad to establish the type and size of the business, and help substantiate the reasonability of the borrowers stated income:

• Industry type / profession of the borrower’s business.
• Business type (sole proprietor, partnership or incorporated and percentage ownership).
• Borrower(s) to provide stated annual business revenue.

GDS / TDS Guidelines

Documentation Requirements

• Sagen may request that the Lender provide a copy of the required documentation on a case-by-case basis.
• For 3 and 4 unit properties Sagen requires that the Lender obtains a general assignment of rents and leases or include this requirement in the Standard Charge Terms.

Sole Proprietorship

• A one-owner operation where the owner directs all the activities of the business, assumes all authorities and obligations, and is liable for its business debts. The sole proprietor income is reported to the Canada Revenue Agency (CRA) on the standard tax return (T1 General) together with the CRA’s required Statement of Business or Professional Activities form (T2125).
• Documentation requirements – Any one of the following must confirm at least two (2) years business-for-self tenure:
  • Business License.
  • GST / HST Return Summary.
  • T1 Generals with Statement of Business Activities attached for a minimum 2 years prepared by an arm’s length third-party.
  • Audited Financial Statements for the last 2 years, prepared and signed by a Chartered Accountant (CA).
  • Business Credit Report
  • Confirmation via public business registry
• Plus, the most recent years’ Notice of Assessment from the borrower(s) to confirm the line 15000 (line 150 prior to 2019) amount and no income tax arrears (In the province of Quebec, both federal and provincial NOA’s will be required).

Partnerships

• Partnerships are businesses owned by two or more individuals who share the profits or losses of the business operation. The partnership income is reported to the CRA on the standard tax report (T1 General) together with the CRA’s required Statement of Business or Professional Activities (T2125), which reflects the percentage of the NET income or loss for each partner of the enterprise.
• Documentation requirements – Any one of the following must confirm at least two (2) years business-for-self tenure:
  • Business License
  • GST / HST Return Summary
  • T1 Generals with Statement of Business Activities attached for a minimum 2 years prepared by an arm’s length third-party.
  • Audited Financial Statements for the last 2 years, prepared and signed by a CA
  • Business Credit Report
  • Confirmation via public business registry
• Plus, the most recent years’ Notice of Assessment from the borrower(s) to confirm the line 15000 (line 150 prior to 2019) amount and no income tax arrears (In the province of Quebec, both federal and provincial NOA’s will be required)

Corporations

• A limited company or corporation is a legal entity, separate from the persons (all shareholders) who own it. The business can own assets, enter into contracts and conduct business transactions in its own capacity. The company is called limited because the liability of the shareholders is limited to their investment. All provincial Corporations must obtain Articles of Incorporation from the province in which they are registered or may be federally incorporated. The applicant’s personal income will be reported by T4 from the corporation.
• Documentation requirements – Any one of the following must confirm at least two (2) years business-for-self tenure:
  • Articles of Incorporation,
  • Audited Financial Statements for the last 2 years, prepared and signed by a CA
  • Business License
  • Business Credit Report
  • T2 Corporate Tax Returns
  • Confirmation via public business registry
• Plus, the most recent years’ Notice of Assessment from the borrower(s) to confirm the line 15000 (line 150 prior to 2019) amount and no income tax arrears (In the province of Quebec, both federal and provincial NOA’s will be required).

Portability

Mortgage insurance is portable under this program:

1. When porting from a Business for Self (ALT. A) Program to another Business for Self (ALT. A) Program mortgage, the premium will be the lesser of:
   1. The increase in the loan amount multiplied by the top-up premium rates defined in the table above, OR
   2. The new loan amount multiplied by the full premium

2. When porting from a Business for Self (ALT. A) Program loan to an existing standard Sagen insured loan, the premium will be the lesser of:
   1. The increase in the loan amount multiplied by the standard premium top-up rates as described in the Portability Feature product overview, or
   2. The new loan amount multiplied by the full standard premium

3. When porting from an existing standard Sagen insured loan to a Business for Self (ALT. A) Program loan, the premium will be the lesser of:
   1. The outstanding mortgage balance multiplied by 2.30% + the top-up amount multiplied by the top-up premium rate, OR
   2. The new loan amount multiplied by the full premium

Example for Scenario #3:

• Outstanding mortgage balance =  $100,000
• Top-up mortgage amount = $80,000
• New Loan Amount = $180,000 (90% LTV)

($100,000 x 2.30%) + ($80,000 x 9.0%)  = $9,500 ($180,000 x 5.85%)     = $10,530 Premium Payable is $9,500 When porting with a top-up mortgage amount, the blended amortization option is available.

Assumptions / Assignments

• Mortgage is assumable subject to meeting Lender guidelines.

Eligible Products *:

• Progress Advance Program
• Purchase Plus Improvement Program
• Second Mortgage Program

*For specific underwriting guidelines related to the above eligible products, please refer to the applicable product overview.

Ineligible Products

• Borrowed Down Payment Program
• Family Plan Program
• New to Canada Program
• Investment Property Program
• Vacation / Secondary Homes Program