Short answer: Both work. Salary is the easiest for lenders to verify because it looks like employee income (T4s and payroll). Dividends qualify when they’re consistent and documented with T5 slips and your T1 General, usually over two years. Many owners use a mix. Retained earnings aren’t personal income unless paid out, though some lenders give credit for them. Plan any change to your pay structure with your accountant and broker well before you apply.
Why Salary Looks Simpler
- A regular, predictable income stream
- A clear payroll history
- T4s every lender understands
- Easy year over year comparison
How Lenders View Dividends
They review T5 slips, the T1 General, the NOA and how consistent the payouts are. Two or more years of steady dividends strengthen the file.
A Mix of Both
Fine when each piece is documented and matched to a lender whose rules add them together properly.
Retained Earnings
Some programs look at overall business strength. Others focus only on personal taxable income. Retained earnings aren’t counted automatically.
Changing Your Pay Before Buying
It can help if planned early with a tax professional and lined up with your mortgage timing. Last minute changes raise red flags.
→ Related: How Lenders Calculate Self Employed Income
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Frequently asked questions
Is salary better than dividends for a mortgage?
Salary is simpler to verify through T4s and payroll, but documented, consistent dividends reported on T5 slips also qualify with many lenders.
Do retained earnings count as personal income?
Not automatically. They stay in the company unless paid out. Some lender programs consider business strength or retained earnings, but it varies.
Should I change how I pay myself before buying?
Only with planning. Coordinate with your accountant and broker well ahead of time. Last minute changes create inconsistencies lenders question.
This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed through Mortgage Connection Inc.