Often yes. The Canada Revenue Agency can register a lien against your property for unpaid tax, and most A-lenders will not advance funds while tax arrears are outstanding. A private lender assessing your equity can frequently refinance to clear the arrears, which then reopens conventional options.
Why tax arrears block conventional financing
Two reasons. Outstanding tax debt can become secured against your property, which affects the lender’s position on title. And unpaid tax reads to an adjudicator as an unmanaged obligation, regardless of how the rest of your file looks.
The result is that many otherwise-strong applications stop dead at the same point: taxes owing must be current before an A-lender will proceed.
There are exceptions. Where the arrears are small, some A-lenders will still close, and some will pay the balance directly from the mortgage proceeds at closing rather than requiring it cleared beforehand. It is worth asking before assuming a private mortgage is the only route, because the difference in cost is significant.
Why this hits self-employed borrowers hardest
Business-for-self borrowers pay tax in lump sums rather than through payroll deductions, which makes arrears far easier to accumulate after a slow quarter. It is a cash-flow timing problem more often than an unwillingness to pay.
How a private mortgage clears the block
A private lender advances against your equity, the proceeds pay the arrears at closing through your lawyer, and the lien is discharged. Your file becomes conventionally financeable again once the arrears are gone and enough clean history has passed.
The sequence matters: the tax debt is normally paid directly from the advance rather than to you, which is how the lender confirms the problem is actually solved.
What it costs and what to weigh
Expect a rate well above conventional pricing, a lender fee and usually a broker fee as a percentage of the loan, plus legal fees and an appraisal. Against that, weigh what the CRA charges in interest and penalties on the outstanding balance, which is not trivial.
Compare the all-in cost of the loan over its real term against the cost of leaving the arrears in place. Sometimes the private mortgage is genuinely cheaper. Sometimes it is not, and a payment arrangement with the CRA is the better route.
Talk to the CRA first
Before borrowing, find out whether a payment arrangement is available to you. The CRA does negotiate arrangements, and one may cost far less than a private mortgage. A broker who does not mention this is not giving you the whole picture.
The exit
Clear the arrears, stay current on the private mortgage, keep filing on time, and refinance into an A-lender once the file supports it. Build the next instalment cycle into your budget so the problem does not recur, because a second round is much harder to solve.
Province-specific detail: Ontario or Alberta.
Confirm the specifics for your own situation. Tax collection powers and the priority of tax debt against a registered mortgage differ by province and change over time. Speak to a licensed mortgage broker, a lawyer, or an accountant in your own jurisdiction before acting.
Typical ranges for rates, lender fees, broker fees, loan-to-value, and term are set out in full in the Ontario guide and the Alberta guide. Every figure varies by file and none of them is a quote.
Frequently asked questions
Can I get a mortgage with taxes owing?
Rarely from an A-lender while arrears are outstanding. Private and some alternative lenders will consider it, typically paying the arrears directly from the advance at closing.
Does the CRA have priority over my mortgage?
Tax debt can be secured against your property and the priority position depends on the type of debt and timing. This is a legal question for your lawyer, not a general rule you should assume.
Will the arrears show on my credit report?
Tax debt is not usually reported to credit bureaus the way consumer credit is, but a registered lien is discoverable on title and will surface in any mortgage transaction.
How fast can this close?
Private files often move in days rather than weeks, which is part of why they are used when a deadline is approaching. Speed is one of the things you are paying for.
