One of my favorite daily emails is from The Hustle, and it’s exactly what it sounds like – an email championing hard work, innovation and creativity to get ahead in the world. This weekend, The Hustle decided to break down the most lucrative side-hustles (although in America, but we can extract the numbers for Canada) and I wanted to take this and show you how it would affect your #mortgageability. (I can’t repeat the numbers or the information from The Hustle for copyright reasons so get on their email service and it’ll break it all down!)
First, what’s a side-hustle? Simple. You work full-time at a job, but you’re also working on the side whether it’s freelance, contract, on-call etc., It may or may not be in the same line of work you’re in when you’re at your regular 9-5 job. You do it to make extra money. Bartending, DJing, driving for a ride-share, dropshipping on amazon etc. You’re your own boss.
How does having a side-hustle affect you qualifying for a mortgage? Simple. It’s. All. About. The. Way. You. REPORT. Your. Income!
The first rule of thumb is – have you been doing this for 2 or more years? That’s the average lenders like to see someone generating an income from a side-hustle. If yes, good. If not, you may need to go to an alternative lender until you reach the two-year mark. Good thing is, the alt-lenders like to offer short-term rates and terms so this might work to your advantage, anyways.
Second, do you report the income on your taxes? If you’ve been working for two years for Uber, for example, and you declare this as business income, the lenders will use a two-year net income average from your last two years of income taxes, on top of your full-time T4 income declared on your taxes (we don’t have to average that – we can use today’s income in most cases).
Third, how much down payment do you have? If you have 5% or more, you must qualify fully using your income. This means, if you’re working full-time and doing a side-hustle, you’ll need to qualify based on the Line 150 income on your tax return.
If you have 20% down or more, and, if your line 150 income from your tax return is not enough, we take a shorter-term loan from an alt-lender and start declaring more income, enough for you to qualify when it’s time for renewal.
And lastly, credit. Super important that if you’re going to apply using a combination of full-time plus side-hustle income, that your credit be strong. How strong? In the 700s or higher would be ideal, no late payments in the last 12 months would be great, and overall a good credit availability would help a lot.
If you have any questions about your side-hustle and how/if it’ll affect your #mortgageability, shoot me a note anytime and let’s get it rolling!