The Gig Economy & How It Impacts Mortgage Financing for Contractors
There is an emerging trend where the concept of a full-time job has been replaced with a series of well paying gigs. It is creating a new market for brokers and challenging lenders to re-define acceptable income sources.
This “Gig Economy” is a global trend in employment that blurs the lines of what it means to be a worker. It’s where we see workers trading the security and benefits of being an employee for the flexibility of being self-employed and, specific to the Gig Economy, providing small bites of work on-demand.
What is the Gig Economy?
The gig economy can be defined by this quote from Robin Chase, co-founder of ZipCar, in an article from the Guardian newspaper:
“My father had one job in his lifetime, I will have six jobs in my lifetime, and my children will have six jobs at the same time.”
We’re seeing a shift from the traditional trend of the employer-employee relationship towards one defined by independent workers and self-management. Think on-demand small bites of work; think Uber, Etsy, AirBnB and TaskRabbit.
Who are Gig Workers?
Gig workers are new-age entrepreneurs. A modern version of the independent, idea-generating business people that have been the foundation of Canadian business since the birth of this country. Whether it was renting out rooms in their homes to wagon-train travellers or selling handmade goods from their front rooms, early gig workers took advantage of answering unmet needs.
These days, the essence of the peer-to-peer exchange remains the same, but thanks to technology, competent workers can pair with great platforms to provide quick and timely service. The consumer benefits are accessibility and affordability. For workers, it’s the ultimate flexibility to work anywhere at anytime. Through technology the marketplace becomes global. Gig workers are no longer tied to working in one location; they can work from their home in Canada or even while on a trip abroad.
Benefits of the side hustle
Gig workers also blur the lines of traditional roles. Students and stay-at-home moms dipping their toes into the gig economy adding neat little side-earners because they don’t have to commit to full days of work. You can pick up your kids from school or hand in your essay to your professor and then switch to being an Uber driver. In the gig economy, the lines between personal and professional become increasingly blurred.
Gig Workers and Bridgewater Bank’s Gateway Program
As gig workers move away from traditional employment, it can present challenges to getting them the mortgage financing they need. At Bridgewater Bank, our borrowers don’t need to be sitting at a desk from 8 a.m. to 5 p.m. for us to view them as employed. Our BwB™ Gateway Mortgage includes Business for Self acceptable income policies aimed at people such as gig workers who are self-employed or commissioned workers.
Here are some key factors for your gig working clients who are planning to purchase a property:
- The ability to prove a consistent income and overall ability to pay-off the mortgage is crucial
- Proof of income means professional documented evidence such as: bank statements, T1-Generals, Notice of Assessment, letter from an accountant
- You must be able to prove that the business exists with evidence such as: corporate search, business registration, etc.
- Government subsidies such as the Universal Child Care Benefit (UCCB), Child Tax Credit or Pension Income can be included in your income
- Ensure all taxes are paid and up to date
Many lenders view inconsistent earnings as lack of stability, which is viewed as risk. Each lender decides their appetite for this type of client. Your gig clients may come to you after being turned away from a major bank. Fortunately, there are several options for gig clients available at Bridgewater and we can support you in finding them a mortgage faster.
To learn more about how BwB can help find a mortgage for your gig clients, contact your local BDM.