Lenders use your T1 General, which is your personal tax return, to see what income you reported, and your Notice of Assessment, which is the CRA’s confirmation of that return, to verify it. For self-employed borrowers, the line that usually matters most is net income after expenses. Your agent can show you how your own return will read before you apply.
What Is a T1 General, and Why Do Lenders Ask for It?
The T1 General is the tax return you file each year as an individual. If you work for yourself, your business income and expenses flow onto it. A lender reads it the way an employer’s pay stub would be read for someone with a paycheque.
Think of the T1 as the story you told the CRA, and the lender wants to see whether that story matches the income you are asking them to count.
What Is a Notice of Assessment, and Why Does It Matter So Much?
A Notice of Assessment, often called an NOA, is the CRA’s reply after it processes your return. It confirms the income on file and shows whether you owe a balance or have a refund. Lenders like the NOA because it comes from the CRA, not from you or your accountant.
Many lenders ask for the last two years of both documents. Some ask for fewer years, and some programs lean on other proof, so ask what your lender needs.
Which Numbers Do Lenders Actually Focus On?
Most lenders look for the same handful of items:
– Total income and net income, which is what is left after your business expenses and deductions
– Your self-employment income section, where your business revenue and expenses are laid out
– Whether the income is steady, growing or dropping from one year to the next
– Whether you owe the CRA money, since an unpaid tax balance can raise a flag
Net income is the big one. A lender may start with that figure, then decide whether any expenses can be added back. An add-back is an expense that reduces your taxable income on paper but does not actually leave your pocket, such as depreciation. Not every lender allows add-backs, and the ones that do have their own rules.
What Does This Look Like With a Real Example?
Say a hairstylist in the Barrie area rents a chair, runs her own clientele, and brings in about $90,000 a year in revenue. After supplies, a vehicle, her phone and a few other expenses, her return shows net income closer to $45,000. Her accountant did a great job keeping her tax bill low. A bank that reads only the net income may treat her as a $45,000 earner, even though her real cash flow is stronger.
Nothing is wrong with her return. It is simply built to minimize tax, and the mortgage world is built to measure income. Those are two different goals, and that gap is where a lot of good borrowers get stuck. (All numbers here are illustrative.)
What Can Make a Lender Nervous About My Return?
A few things tend to raise questions. Income that dropped sharply from the year before is one. A tax balance owing to the CRA is another, along with returns that were filed late or amended. A mix of personal and business spending can also muddy the picture.
None of these end the conversation. They simply mean the lender will want a clear explanation, and a good file tells that story up front.
What If My Return Shows Less Than I Really Earn?
Then you have options worth exploring. Some lenders look at business bank statements alongside your return. Some programs are built for self-employed borrowers whose returns understate their income. Alternative lenders, which are regulated lenders with more flexible rules than a bank, often take a wider view of your whole picture.
These routes can cost more than a bank mortgage, so ask about fees and about the plan for getting back to bank pricing later. The goal is a mortgage that fits you today and a path to something stronger down the road.
How Can I Get My Paperwork Ready?
Log in to your CRA My Account and download your recent Notices of Assessment. Gather your last two filed T1 returns, including the business pages. Check that you do not owe the CRA a balance, or have a payment plan in place if you do. Then bring your accountant and your mortgage agent into the same conversation before your next filing, since small choices on a return can change how a lender reads it.
Frequently asked questions
What is the difference between a T1 General and a Notice of Assessment?
The T1 General is the return you file. The Notice of Assessment is the CRA’s response confirming what it processed. Lenders use the T1 to see the detail and the NOA to verify it.
How many years of tax returns do lenders want for a self-employed mortgage?
Many ask for two years of T1 Generals and Notices of Assessment. Some programs ask for less or use other proof of income, so check with your mortgage agent.
Do lenders look at my gross income or my net income?
Most start with net income, the amount left after expenses. Some may allow certain add-backs, depending on the lender and the program.
Can I get a mortgage if I owe the CRA money?
Sometimes. Lenders often want a balance cleared or a payment arrangement in place. Talk to your agent early so you know what to expect.
What if my tax return shows low income because of write-offs?
Alternative options may exist, such as programs that review bank statements or take a wider view of your income. Your agent can point you toward the ones that may fit.
Ready to Talk Through Your Numbers?
If you work for yourself and the bank said no, I would love to hear your goals and what the bank told you. Book a free 15-minute chat and we will look for another path together. You can also grab the free guide at lorafenn.ca/free-bank-said-no-guide/.
About the author
Lora Fenn, Mortgage Agent L1, DLC Yellow Brick Mortgages (Brokerage Licence #13854), a Barrie mortgage agent who helps Ontario homeowners and buyers find another path when the bank says no, serving Barrie, Innisfil, Orillia and all of Ontario.
*Any figures are illustrative only and subject to lender approval (O.A.C.). Lora Fenn, Mortgage Agent L1, DLC Yellow Brick Mortgages (Brokerage Licence #13854).*
