Mortgage files are getting harder. That may be good news for brokers

As purchase activity gradually picks up, many brokers say they’re finding it harder to move deals across the finish line.

Many report seeing more complex files, whether due to declining property values, less straightforward income structures or stricter lender criteria.

The shift is forcing brokers to get more creative, spend more time on each file and, at times, tell clients that their purchase may not be as straightforward as they had hoped.

That, however, may provide an opportunity for brokers to prove their worth.

“Every year it’s been getting more complex, but over the last two years we’re seeing more challenges for people,” says Tracy Valko of Valko Financial. “I’d say seven out of ten deals are complicated now.”

Non-traditional income is becoming more common

Valko attributes some of the rise in file complexity to a challenging economy and labour market, with more clients relying on side hustles, part-time work or self-employment.

Statistics Canada counted 2.7 million self-employed workers in March 2025. A separate H&R Block survey conducted that year estimated that 7.4 million Canadian adults, or nearly one in four, participated in the gig economy.

“The self-employed sector is growing exponentially in Canada, and the traditional way of verifying people’s income with pay stubs and job letters is not the norm that we’re seeing,” Valko says.

It’s not just those earning gig income or launching a business who are bringing more complex files to brokers. Even clients with a single employer and full-time hours may not realize that the structure of their compensation can create challenges when they apply for a mortgage.

“Companies have changed the way they pay employees to help alleviate some of the burden of tax remittances or benefits, so they’re not permanent full-time employees; they’re working full time on contract,” Valko says. “Clients aren’t understanding what that does for their [ability to borrow].”

Despite the changing ways Canadians earn or supplement their income, Valko says prime lenders have not substantially adjusted their income-verification requirements. “I don’t think that the banks and the regulators are willing to do that yet, because they still want to be cautious on financing criteria to make sure that our defaults don’t increase,” she says.

Declining values have put clients in a precarious position

Not only are income profiles becoming less straightforward, but many existing homeowners are also contending with declining property values, particularly in certain markets.

“I’m saying ‘no, I can’t help you’ to more people than ever before. That’s unfortunate,” says Ross Taylor of TMG The Mortgage Group. “If I could give you one short reason why the majority of them are harder to do, it’s because of the decline in value of real estate over the last five years.”

Taylor says declining values have put some condo owners, including first-time buyers and small investors, in a precarious financial position. Rural homeowners and buyers who purchased pre-construction properties are also finding themselves with fewer options in some markets.

“This depletion of equity is taking away options for many people, and it’s a part of the renewal wave I don’t think gets enough discussion,” he says.

Hours before speaking with Canadian Mortgage Trends, Taylor says he received a call from a dual-income couple looking to sell their 15-acre property in York Region and arrange financing for their next home. “Despite good income and good credit, it’s rural, so it’s by no means a vanilla file; if this borrower profile was in the city, it would be very easy.”

A few hours later, Taylor described a conversation with a first-time buyer who purchased a pre-construction two-bedroom condo in Toronto in 2022. He estimates the unit is now worth about $200,000 less than its purchase price, while comparable rents are several thousand dollars a month below its carrying costs.

“When the wind stops blowing, these people are finding themselves trying to solve an unsolvable problem: trying to close on a purchase where the current value may be $100,000, $200,000 or $250,000 less than the purchase price,” Taylor says. “This is causing havoc.”

Lenders are demanding more paperwork

Alongside the increased complexity created by non-traditional borrower profiles and declining property values, brokers say lenders are also asking for more documentation.

“In 2026, there have been a lot of repeat clients, so we’ve dealt with their files before and their income hasn’t changed, but there are more questions and more paperwork required,” says John Greenlee of DurhamMortgage.com Ltd. “They’re asking for more than they used to.”

Greenlee says lenders across the market appear to have increased their documentation requirements over the past couple of years, particularly in the alternative space. “We’re still getting deals done, there’s just more of a grind to it,” he says.

Lenders also acknowledge that documentation requirements have increased amid more complex income profiles and a challenging economic environment.

“There was probably a misconception that if you go to an alternative lender, because you’re paying a higher rate or fee, there’s going to be less paperwork and it’s just going to be an easier transaction. It’s anything but in today’s market,” says Michael Wolfe, vice-president of residential credit at EQ Bank. “I would say that it’s on par, if not a little bit more difficult now, to really make sense of that business-for-self income, get the 12 months of bank statements, look at financials and look at different ways to make the transaction work.”

Wolfe says that is especially true for properties in more challenging segments, including condos in major urban markets.

“A lot of lenders in the alternative space especially have pulled back on their loan-to-value ratios, so if we were comfortable at one point at 80% on the purchase of a condo, we might be at 70% today,” he says. “Not only are they dealing with the lower value relative to the purchase price, but they’re also looking at a lower amount that we would be able to leverage out of the gate, so it’s kind of a double whammy.”

Wolfe adds that much of the complexity in today’s market is rooted in the challenges Canada’s economy has faced in recent years, from tariffs to inflation to slower growth.

“If we can get some stability, this could be a temporary blip,” he says. “If we continue to encounter significant change like we’re seeing now, this is probably the new normal.”

Alt is starting to look more like A

Alternative lenders may be demanding more paperwork, but increased competition in the sector has also helped narrow the pricing gap with prime lenders.

“The space between a conventional prime deal, or A-deal, and an alt deal is very, very narrow right now,” Wolfe says. “We see the Big Six playing in our sandbox more than ever and oftentimes doing transactions that we would have traditionally believed to be EQ Bank transactions.”

Wolfe adds that the arrival of new entrants in recent years has increased competition among alternative lenders, helping narrow the pricing gap for borrowers even as documentation requirements have risen.

As more borrowers with strong credit scores and incomes from non-traditional sources enter the alternative space, their overall profiles are beginning to more closely resemble those of prime borrowers.

“The average FICO score for an alt borrower is generally over 700, so really the defining factor that you would look at between an alt and a prime borrower is the income piece,” Wolfe says. “Most other aspects of the transaction are very similar.”

That is moving alternative lending closer to the mainstream, beyond its traditional role serving a narrower group of higher-risk borrowers.

“When you look at even 10 years ago, pricing was almost based on the concept that these clients were a lesser client,” says First National vice-president Elena Robinson. “Typically, a B deal was far higher in terms of rate when it came to an alternative deal, and now when you look at what the pricing is for alternative deals, it’s very close to what a prime rate is.”

Robinson says brokers increasingly need to understand the alternative space rather than treat it as a niche category reserved for specialists, while also preparing for greater documentation requirements.

“A lot of brokers just didn’t want to get involved in learning that part of the industry, that alternative space,” Robinson says. “There are a lot of alternative clients who are just as strong as prime clients, and I think that perspective has changed.”

Why increased complexity could be good for brokers

Despite the additional work that comes with more complex files, some brokers believe a more demanding lending environment could ultimately benefit the channel.

“The cookie-cutter A deals are eventually going to be done very quickly through AI with the banks. That’s quite clearly what we’re seeing,” says Valko. “Complexity is where we find our niche; we can spend time with clients, educate them, go through the process and get them on a better path.”

Valko argues that as banks use more technology to process straightforward applications, brokers can distinguish themselves by providing advice and guidance to borrowers who do not fit the big banks’ mould.

“We can advocate for clients by presenting their story, their position, their strengths and how their income is generated so the lender better understands it,” she says. “As complexity increases, the mortgage broker channel will continue to grow.”

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Last modified: August 24, 2026