A borrower is self-employed and operates a consulting business. They have consistently declared $120,000 in gross revenue and $40,000 in business expenses for the past three years. However, their Notice of Assessment (NOA) shows a 'taxable income' of $60,000 due to various deductions and write-offs. Which income figure is a lender most likely to use for mortgage qualification?

Question: A borrower is self-employed and operates a consulting business. They have consistently declared $120,000 in gross revenue and $40,000 in business expenses for the past three years. However, their Notice of Assessment (NOA) shows a 'taxable income' of $60,000 due to various deductions and write-offs. Which income figure is a lender most likely to use for mortgage qualification?

Answer options:

• $120,000 (Gross Revenue) ✅ $80,000 (Gross Revenue - Business Expenses)
• $60,000 (Taxable Income from NOA)
• An average of gross revenue and taxable income.

Correct answer: $80,000 (Gross Revenue - Business Expenses)

Explanation: Lenders for self-employed individuals generally use the net business income (gross revenue minus business expenses) as verified on the T1 General and NOAs, as this reflects the actual income available to service debt, before personal deductions. In this case, $120,000 - $40,000 = $80,000.