Commission income is common in Canada: real estate agents, car salespeople, financial advisors, insurance brokers, pharmaceutical reps and many technology sales professionals earn a large share of their pay through commissions. When your income varies month to month, the amount you can borrow depends on how a lender averages and verifies it. This page covers how lenders count commission income, for employees paid on a T4 and for self-employed commission earners. It’s part of our mortgage lenders and brokers guide.
How lenders classify commission income
| Commission type | How lenders view it | Documentation |
|---|---|---|
| Base salary + commission | Base is guaranteed; commission is variable income | T4s, pay stubs (base and commission shown separately), employer letter |
| 100% commission (employee) | Fully variable; seen as higher risk | T4s, a two-year history, employer letter, T2200 if you claim expenses |
| 100% commission (self-employed) | Self-employment income, under different qualification rules | T1 Generals, NOAs, a two-year business history |
| Draw against commission | Treated as commission, not salary: draws are advances, not guaranteed pay | T4s, pay stubs, an employer letter explaining the draw |
Key distinction: an employee earning commission on a T4 is treated differently from a self-employed commission earner reporting business income on a T1. The employee route is simpler. Self-employed agents and brokers are qualified the way any business owner is, on net income after expenses; the self-employed mortgage guide covers that in full.
How lenders calculate commission income
The two-year averaging method
Most lenders use this approach:
Qualifying income = the lower of the two-year average and the most recent year
| Year | Commission earned |
|---|---|
| Year 1 | $85,000 |
| Year 2 | $95,000 |
| Two-year average | $90,000 |
| Used for qualification | The average, since the most recent year is higher |
If income is declining:
| Year | Commission earned |
|---|---|
| Year 1 | $95,000 |
| Year 2 | $75,000 |
| Two-year average | $85,000 |
| Used for qualification | $75,000, the most recent year, since it is lower |
Declining income draws caution. Lenders want to see stable or growing commission earnings, and a sharp drop can lead to a decline or a request for a recent pay statement showing a recovery.
Base + commission
Lenders count a guaranteed base salary in full. How much of the commission they count varies: some use the full two-year average, others count only part of it, especially when commission is a large share of pay or the history is short.
| Component | Amount | How it’s used |
|---|---|---|
| Base salary | $55,000 a year | Counted in full |
| Commission (two-year average) | $65,000 a year | Counted in full or in part, depending on the lender |
| Qualifying income, lender counting 50% of commission | $87,500 | |
| Qualifying income, lender counting all of it | $120,000 |
The gap between the two lenders is $32,500 of qualifying income, a large difference in how much you can borrow. The mortgage affordability calculator shows what each income supports.
Lender types and commission income
| Lender type | Commission treatment | Notes |
|---|---|---|
| Big banks | Usually a two-year average for T4 commission employees | Policies on how much commission counts differ between banks and sometimes between underwriters, so two banks can qualify the same income differently |
| Monoline lenders | Usually a two-year average | Available only through mortgage brokers |
| Credit unions | Varies widely | Some underwrite unusual files by hand and consider context |
| B-lenders | More flexible averaging; may accept a shorter history | Higher rates and fees; some offer stated-income programs for self-employed earners |
| Scenario | Lender types that tend to fit |
|---|---|
| Employee with T4 commission (2+ years) | Big banks, monolines, credit unions |
| Self-employed commission (real estate agent, broker) | Credit unions, B-lenders with stated-income programs, banks with self-employed programs |
| New to commission (less than 2 years) | B-lenders; some credit unions will consider one year plus a strong base |
| Declining commission | B-lenders, which may use a stated or recent income rather than strict averaging |
The best mortgage lenders in Canada page compares named lenders.
Required documentation
For T4 commission employees
| Document | Purpose |
|---|---|
| Last two years of T4s | Confirms total pay, including commission |
| Recent pay stubs (last 3) | Shows current base and year-to-date commission |
| Employment letter | Confirms position, pay structure, start date and ongoing employment |
| Commission breakdown | A letter or pay stub detail showing the base and commission split |
| T2200 (if you claim employment expenses) | Some lenders ask for it to understand your net commission income |
| Notices of Assessment | Last two years; confirms the income the CRA assessed matches your T4s |
For self-employed commission earners
| Document | Purpose |
|---|---|
| Last two years of T1 Generals | Shows total self-employment income |
| Last two years of NOAs | CRA confirmation of reported income |
| Business financial statements | Gross revenue and expenses |
| GST/HST registration | Evidence of an active business |
| Business bank statements (12 to 24 months) | Shows actual cash flow |
| Accountant letter | Confirms the income is reasonable for the business |
The full mortgage document checklist lists what every borrower needs.
Qualification examples
Example 1: sales rep with base + commission
| Factor | Details |
|---|---|
| Base salary | $60,000 |
| Commission, year 1 | $45,000 |
| Commission, year 2 | $55,000 |
| Two-year commission average | $50,000 |
| Lender counting all of the commission | Qualifying income: $110,000 |
| Lender counting 50% of it | Qualifying income: $85,000 |
The same borrower qualifies on very different incomes depending on the lender’s policy.
Example 2: real estate agent (100% commission, self-employed)
| Factor | Details |
|---|---|
| Gross commission income, year 1 | $140,000 |
| Gross commission income, year 2 | $160,000 |
| Business expenses | $45,000 a year (brokerage fees, marketing, vehicle) |
| Average net income on the NOAs | $105,000 |
| A-lender | Qualifies on the average net income |
| B-lender stated-income program | May accept a higher stated income if bank statements support it, at a higher rate |
Example 3: new commission earner (less than two years)
| Factor | Details |
|---|---|
| Started commission job | 14 months ago |
| A-lender | Often declines until there’s a two-year history, unless a strong base salary carries the application |
| B-lender | May consider one year of T4 history plus an employer letter |
| Options | Wait for the two-year history, or use a B-lender now and refinance later |
Ways to strengthen an application
| Approach | How it helps |
|---|---|
| Time your application | Applying after a strong year raises the two-year average |
| A clear employer letter | States your commission structure and confirms ongoing employment |
| A mortgage broker | Brokers know which lenders count commission more fully; see the best mortgage brokers |
| Lower other debts | Paying down car loans, lines of credit and cards improves your TDS ratio |
| A co-borrower | A spouse with stable T4 income strengthens the application |
| A two-year track record | If you recently switched to commission, waiting until you have two full years opens more lenders |
| Watch employment-expense claims | Large T2200 expense claims lower the net income on your return, which some lenders use |
Commission income and the stress test
Commission income is tested at the same qualifying rate as any other income. Lenders check that you could afford the payments at the greater of your contract rate plus 2% or 5.25%, a floor set by OSFI for uninsured mortgages and by the federal government's mortgage insurance rules (the Minister of Finance's Eligible Mortgage Loan Regulations) for insured ones. The stress test guide explains it in full, and the GDS and TDS limits set how much of your qualifying income can go to housing and debt.
Common challenges
| Challenge | Options |
|---|---|
| Less than two years of commission history | A B-lender until you have two years, or a co-borrower with stable income |
| Commission is declining | Lenders use the lower year; waiting for a stronger year, or a B-lender |
| Employer won’t provide a detailed letter | Ask HR for the minimum: position, pay structure, start date and ongoing status |
| Self-employed and income is hard to prove | A B-lender stated-income program with bank statements and an accountant letter |
| High gross commission but high expenses | A-lenders use net income; some B-lenders accept a stated income supported by gross deposits |
| Seasonal or bunched commission | The annual T4 matters more than monthly swings; two consistent years help |
| Parental leave during the averaging period | Lenders look at your return-to-work date and pre-leave income; see getting a mortgage on maternity leave |
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them on September 29, 2026. How we check facts.