Getting the Letter of Employment for a Mortgage in Canada
What You Should Know
- Most mortgage lenders require your employer to write details about your employment status.
- The purpose of an employment letter is for lenders to understand your job stability and verify your application.
- The letter must include things such as job title, salary, and years of employment.
- Employment letters are very common, and your HR department likely already has a template for them.
A letter of employment is one of the required documents to get a mortgage in Canada. Lenders want to ensure income stability when qualifying you for a mortgage, and this document provides essential information. In general, lenders want to see salary information, years of employment, type of employment, and other such details in your employment letter.
We have included all the types of applicable information below and the different requirements from the big six banks. The letter is quite common as most mortgage lenders in Canada require it. Most likely, the human resources department of your company can complete this for you. Otherwise, we have a template available below.
While most lenders require a job letter from your company, some lenders can verify your income through pay stubs, bank statements, or your T1 Tax return.
| Name of Bank | Specifically Requires Letter of Employment | Bank Mortgage Document Checklist |
|---|---|---|
| TD | Yes | Click Here |
| RBC | Yes | Click Here |
| CIBC | No | Click Here |
| BMO | Yes | Click Here |
| Scotiabank | Yes | N/A |
| National Bank | Yes | Click Here |
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|---|---|
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Mortgage Job Letter Explained
Your chances of missing a mortgage payment increase if you are unemployed. Banks understand this and want to ensure you have a stable job when assessing your mortgage application. They generally prefer stability and predictability over a high-earning yet risky applicant. For example, mortgage lenders like to see you have spent many years with the same company and have full-time employment in a stable industry.
However, you can still receive a mortgage if you work for a startup or are self-employed. But you may have to provide a higher down payment or get a higher mortgage interest rate. Compared to employed individuals, self-employed applicants usually need to provide additional information in their employment letter.
Information Requirements for a Mortgage Job Letter
- Company Information: Your employment letter should be issued on an official company letterhead with the company’s name, address, logo, and contact information.
- Employment Information: The job letter will list your job title, number of hours worked, and date of beginning work for this company. A brief description of your job duties may also be included. Make sure this matches what you put on your mortgage application.
- Compensation: The letter also must include your salary information and compensation structure. The job letter should mention full-time, part-time, or contract employment.
- Finishing Touches: Your employer must also date and sign the letter. Lenders want to ensure the information is no older than 60 days.
- Additional Clarifications: Your lender may ask your employer to clarify additional things such as:
- Pay deductions
- Seasonal pay fluctuations
- Recent income changes
- Overtime income
- Maternity or Paternity leave
- Employment probation
How to Get Your Job Letter Completed
The best way to get your job letter is to ask your employer. Most employers are familiar with this document and can quickly provide you with the information. However, if you work for a smaller company, you can provide a supervisor or manager with the template below. Once the letter is completed, it's best to have your company spokesperson send it directly to your mortgage representative. If you are self-employed, you can skip to the following section as the process is different.
Ensuring Your Job Letter is Accepted
- Include all the required information: job title, start date, salary, employment type.
- Make sure the letter is no older than 60 days. However, 30 days is preferred.
- Ensure the job letter is on company letterhead and signed by an authorized representative.
- Ask your employer to include a brief description of your job duties.
Sample Employment Letter for a Mortgage
[Date]
To whom it may concern,
We confirm the following details regarding the employment of [Applicant Name]:
- [Applicant Name] works as a [Job Title] for us
- Their gross annual salary is [Annual Salary], and they work [weekly hours] hours per week
- They are employed on a [full-time, part-time, or contract] basis
- They began working with us on [date of employment]
If you have any more questions, don't hesitate to contact us at [phone number] or [email address].
Regards,
[Company Representative Signature]
[Representative Name]
[Representative Job Title]
[Company Name]
What to Do if the Lender Does Not Accept Your Job Letter
If the lender does not accept your job letter, there are a few things you can do. Most likely, your mortgage lender just requires more information about your job. You can ask your employer to write a description of your job duties. You can also try another lender who has different requirements.
Job Letters for Self Employed Mortgage Applicants
If you are a business owner, entrepreneur, or freelancer, you need to apply for a self-employed mortgage in Canada. Although you will still be eligible to receive a mortgage, the process requires more documents, and your interest rate may be higher. It's also important to understand that having many deductions will lower your income, which will affect your maximum mortgage affordability. You will likely need to show the following documents:
- Previous two to three years of income tax returns.
- Income statement, balance sheet, and statement of cash flows. You may be able to collateralize some of your business assets to receive a lower interest rate.
- Articles of incorporation or proof of licence.
- Six to twelve months of personal and business banking statements.
- Contracts for future projects.
- Capitalization table to show your ownership percentage.
- Up to date Notice of Assessment from the Canada Revenue Agency.
- Proof of GST or HST payments.
The Bottom Line
A job letter is one of the required documents to get a mortgage in Canada. The letter confirms essential information such as employment status, salary, and hours worked. Most likely, your employer can quickly provide you with this document. However, if you are self-employed, the process is different. Self-employed applicants need to provide additional information as mentioned above.
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