As economic uncertainty and global tariffs shake up multiple sectors, mortgage renewal just became more complicated for some self-employed Canadians — particularly those banking with BMO.
The bank has recently introduced stricter lending guidelines for self-employed borrowers in what it considers “higher-risk” industries, according to Nick L’Ecuyer, founder and broker at Mortgage Wellness. The changes apply to mortgage renewals and are designed to reflect concerns about economic volatility tied to global trade tensions and rising financial risk in specific employment sectors.
Under BMO’s new policy, the Total Debt Service (TDS) ratio limit has been reduced from 44% to 42%, meaning a smaller portion of a borrower’s income can be allocated to debt payments. The Gross Debt Service (GDS) ratio cap is also now 39%, with the bank requiring that at least one borrower on a mortgage have a minimum credit score of 750.
“These changes are not yet industry-wide,” said L’Ecuyer, noting that BMO is currently the only major Canadian bank taking this approach. “No other major lenders we work with have introduced similar restrictions or indicated they will.”
Industries Impacted
The policy affects self-employed borrowers across several key sectors, including:
- Construction
- Transportation
- Leisure and entertainment
- Retail sales
- Banking and finance
- Manufacturing
- Farming and natural resources
- Wholesale trade
- Utilities
- Steel and aluminum industries
While these new criteria may be alarming for affected borrowers, L’Ecuyer notes that for the past few years, many lenders have accepted TDS and GDS ratios as high as 50%, particularly when borrowers demonstrate strong credit and consistent income. That flexibility was seen as a necessary adjustment during a period of elevated interest rates, which inflated debt ratios without necessarily increasing lending risk.
Still, he acknowledges that BMO’s shift could signal a broader trend toward tightening — and it has mortgage brokers watching closely.
“This move is significant, even if it’s isolated for now,” L’Ecuyer said. “It’s not yet the norm, but self-employed borrowers in the impacted sectors should start planning early and take extra care when preparing for renewal.”
Advice for Self-Employed Borrowers Renewing in 2025
Start early:
Mortgage renewals for self-employed applicants can take longer due to the documentation required. Begin the process 60–90 days in advance to avoid last-minute surprises.
Organize your financials:
Keep your income reporting clean and consistent. Up-to-date tax filings and well-documented business finances are critical. Most lenders review the last two years of tax returns, so your 2022–2024 filings could influence approvals.
Build and protect your credit:
Strong credit scores are more essential than ever. Stay on top of credit card and loan payments — and remember that even cellphone and utility payments can affect your score.
Pay down other debts:
Business loans often require personal guarantees, which means they impact your personal debt ratios. Reducing liabilities, especially those reported on personal returns, can improve your financial standing.
Work with a broker:
Mortgage brokers have access to a broader range of products, including “stated income” mortgage programs designed for self-employed individuals who may report lower net income due to deductions but generate strong gross revenue. These options offer more realistic evaluations of borrower capacity.
“The good news,” L’Ecuyer adds, “is that most lenders are still using a case-by-case approach, and borrowers in affected industries still have options.”