The gig economy and its impact on mortgage eligibility
There is an established and growing population of workers in the employment market where the concept of a traditional job has been replaced with a series of well-paying gigs. It is creating a new market for brokers and challenging lenders to redefine acceptable primary sources of income. According to Statistics Canada, the number of people working gig work is rising.
1 in 10 Canadians in the labour force worked in the gig economy before 2020—approximately 1.7 million Canadians. Today that number is even higher—perhaps as many as 8.75 million adults work in the gig economy in Canada. It’s a big shift in a relatively short period of time.
WHAT IS THE GIG ECONOMY?
A gig, by definition, is a temporary job. The gig economy is characterized by people working as independent contractors or freelancers or in short-term contracts, possibly for more than one employer.
It’s 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 Upwork, Fiverr, Uber, Etsy, Airbnb, and TaskRabbit.
It’s where we see workers trading the security and benefits of being an employee for the flexibility of being self-employed or working on demand. These days, where there are labour shortages in many industries, gig workers are finding it easier than ever to pick up work. A recent Statistics Canada report highlights a particular uptick in digital platform employment, which connects customers and service providers through a digital platform.
What is a Gig Worker?
A gig worker can be anyone at any age. It might be someone supplementing another job or working part-time. It could be an entrepreneur who enjoys the flexibility of self-employment. Perhaps it’s someone doing what they need to do to provide for their family.
Gig workers also blur the lines of traditional roles. Students and stay-at-home moms are dipping their toes into gig economy jobs, earning on the side because they don’t have to commit to full-time jobs. They can drop off their kids at school and pick up some fares as a driver with a ride-share service like Uber.
HOW DOES GIG WORK AFFECT MORTGAGE ELIGIBILITY?
Most mortgage lenders want to see a history of consistent income with a likelihood of the same in the future. Consistent employment is the best way to demonstrate that, especially when applying for a mortgage. Good credit scores and a clean credit history can also be important, but showing a consistent and steady income is one of the most significant factors in securing a mortgage.
Gig work doesn’t provide a single, steady paycheque from the same employer, which most A lenders prefer when evaluating a mortgage deal. That doesn’t mean a gig worker can’t qualify for a mortgage. Using a mortgage broker and looking at alternative lenders are great options for people with less traditional sources of income.
GIG WORKERS AND BRIDGEWATER BANK
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 Bridgewater Bank Gateway Mortgage products include a Self-Employed Mortgage with income policies aimed at people who have non-traditional income. Our expert underwriters and BDMs are always looking at ways to project a reasonable income for clients, understanding that a self-employed or gig worker will not always fit into the usual income box.
With nearly one-third of the workforce doing gig work, you will run across them in your client list. Here are some key elements your clients should consider when planning to purchase a property:
- They must prove they are earning a consistent income and have the ability to pay their mortgage.
- They need proof of income using professionally documented evidence such as recent financial statements or a statement of business activities.
- They must prove that the business exists through business license/registration, trade license, or GST registrations/returns. Or, if they subcontract, they may need an employment contract, a lot like a letter of employment.
- They can include income from retirement plans, rentals, investments, and even spousal or child support payments under the right circumstances.
- They need proof their taxes are paid and current.
If you have gig clients, an alternative lender might be the best solution for their mortgage needs, so look at what Bridgewater Bank has to offer. Our expert BDMs and underwriters will work with you to find the best way for your clients to prove their income and understand how much serviceable income they actually have to qualify by using our gross-ups & add-backs method.
To learn more about how Bridgewater Bank can help find a mortgage for your gig clients, contact your local BDM.