Quick answer: Yes, you can often get a mortgage, refinance or second mortgage in BC while you owe CRA, as long as you have enough equity. Most lenders require the tax debt to be paid from the new loan at closing, with your lawyer or notary sending the money straight to CRA. A bank costs the least if your income qualifies. A B lender or a private second mortgage costs more but can approve files a bank declines, including those with a lien on title.
Many of the CRA files I see in Surrey and the Fraser Valley belong to self employed trades, truck drivers and small business owners. A slow year or a GST balance snowballs, and the bank says no. Home equity usually offers a way out.
How do lenders treat CRA tax arrears?
Lenders see tax arrears as a creditor that can act quickly. Banks usually ask self employed borrowers for recent Notices of Assessment, so a balance owing shows up right away. A bank may still refinance if your income qualifies and CRA is paid at closing. If income has dropped, or there is a lien or garnishment, the file usually moves to a B lender or a private lender.
- Personal income tax is the most common and the easiest to clear from a refinance.
- GST or HST is viewed more seriously. GST collected from customers is held in trust for the Crown, and corporate directors can be personally liable for amounts the company did not remit, plus penalties and interest.
- Unfiled returns are the hardest, because no lender can size an unknown debt. File first.
What can CRA do if the debt stays unpaid?
- Garnishment. CRA can send a legal document, such as a requirement to pay, to your employer or your bank.
- A lien on your home. After certifying the debt through a provincial judgment or a Federal Court certificate, CRA can register a lien against your property, giving it priority when the property is sold.
- Seizure. If a certified debt still goes unpaid, CRA can seize and sell assets.
CRA says that in most cases it removes the lien once the debt is paid, which is why paying CRA at closing works.
Does a CRA payment arrangement solve the problem?
A payment arrangement spreads payments over time based on what you can afford, and CRA will ask for details of your income, expenses, assets and debts. It is worth setting up because it shows good faith. But interest compounds daily at the rate set by law until the balance is paid, and CRA can still apply your refunds and benefit credits to the debt. In some circumstances you can ask for relief from penalties and interest. For a mortgage, an arrangement is usually a bridge; most lenders still want the balance cleared at closing.
How does paying CRA from a refinance at closing work?
Your accountant or lawyer gets a dated payout figure from CRA, because interest runs daily. The lender's commitment requires CRA to be paid from the mortgage funds. On closing, your lawyer or notary pays CRA directly and arranges the lien discharge if there is one. You never handle the money, which is what the lender wants. Cards and loans can be cleared the same way; see debt consolidation in BC.
What does it cost to pay off CRA with your mortgage?
This example is for illustration only. A self employed contractor in Surrey owns a home worth $1,000,000. The first mortgage is $560,000 with three years left and a payment of $3,100 a month. He owes CRA $72,000: $48,000 of income tax and $24,000 of GST. The bank declines because of lower income and the balance owing.
| Item | B lender refinance | Keep the first, add a private second |
|---|---|---|
| New loan | $650,000 at 6.49%, 2 year term, 30 year amortization | $80,000 at 10.99%, 12 month term, interest only |
| APR on the new loan | About 7.1% | About 17.6% |
| Fees | $8,500 (1% lender fee plus $2,000 legal and appraisal) | $4,800 (2% lender fee, 1.5% broker fee, $2,000 legal and appraisal) |
| Penalty to break the first mortgage | $9,000 (example figure) | None |
| Total monthly payments | $4,067 | $3,833 ($3,100 plus $733) |
| Borrowing as a share of the home's value | 65% | 64% combined |
Both pay CRA in full at closing. The refinance covers the $560,000 mortgage, $72,000 to CRA, the penalty and fees, leaving $500. The second nets $75,200, pays CRA and leaves $3,200; over 12 months it costs $8,792 in interest plus $4,800 in fees, or $13,592.
The private second costs less in year one and avoids the penalty, but it must be paid out when its term ends, usually by refinancing once the debt is gone. The B lender refinance costs more up front but has no 12 month deadline. Read more about B lenders and second mortgages in BC.
When is a mortgage not the right answer?
If the tax debt is larger than your usable equity, or you cannot afford the new payment, borrowing more can make things worse. A consumer proposal can include CRA debt; see mortgages and consumer proposals.
How do you avoid owing CRA next year?
- Set money aside as you earn it in a separate tax account.
- Keep GST separate. It was never your money.
- Pay instalments if required. For 2026, you must pay instalments if your net tax owing is over $3,000 and was also over $3,000 in 2025 or 2024.
- File on time, even if you cannot pay. An unfiled year blocks almost every option.
Our self employed mortgage page shows what lenders look for in your returns.
What are the key takeaways?
- With equity, owing CRA rarely ends your options; most lenders require CRA to be paid at closing.
- CRA can garnish income and register a lien, so act early.
- A payment arrangement helps, but interest keeps compounding daily.
- Compare the APR, fees and exit plan, not just the payment.
Owe CRA and own your home? Book an appointment and I will compare your options side by side, with every fee and the APR in writing before you sign.
What other questions do readers ask?
Can I refinance my home if I owe CRA?
Often, yes, if you have enough equity. Most lenders will require the CRA balance to be paid from the new mortgage at closing, and your lawyer or notary pays CRA directly. A bank may approve it if your income qualifies; otherwise a B lender or a private second mortgage is the usual route.
Can CRA put a lien on my house in BC?
Yes. Once CRA certifies the debt through a Federal Court certificate or a provincial judgment, it can register a lien against your property. That gives CRA priority when the property is sold. CRA says it will remove the lien in most cases once the debt is paid.
Does a CRA payment arrangement help me get a mortgage?
It helps show you are dealing with the debt, and it can head off collection action. But interest keeps compounding daily, and many lenders still want the balance paid at closing, so a payment arrangement is usually a bridge, not a fix.
Is GST debt treated differently from income tax debt?
Lenders tend to view it more seriously. GST or HST you collected is held in trust for the Crown, and directors of a corporation can be personally liable for amounts the company did not remit, plus penalties and interest.
How do I avoid owing CRA next year?
Set aside part of every payment you receive in a separate account, keep GST in its own account, and pay instalments if CRA requires them. For 2026, you must pay instalments if your net tax owing is over $3,000 and it was also over $3,000 in 2025 or 2024.
Where do these numbers come from?
- Canada Revenue Agency: putting a lien on or seizing your assets
- Canada Revenue Agency: garnishing your income and accounts
- Canada Revenue Agency: how to find help if you cannot pay your taxes
- Canada Revenue Agency: directors' liability for amounts held in trust
- Canada Revenue Agency: who has to pay income tax instalments
Published November 6, 2026. This article is general information, not personal financial advice. Rates and programs change, and every approval depends on your full application. Asim Ali is a licensed mortgage broker with Dominion Lending Centres A.I.M.I. Collective Mortgage Group.