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Can You Qualify With Income Tax Arrears or Debt Collections?

June 22, 2022 | Posted by: Matt Broom-Hall

In this article, we talk about the importance of being current with your Income Tax, as it determines whether qualifying for a mortgage in Canada, especially a self-employed mortgage, will be easy or hard for you. 

Super-Priority Definition
What the heck is Super-Priority and why should you care?  If you want to get a mortgage and income tax isn't your favourite topic, time to learn.

It is very important to understand the term Super-priority Claim, which simply means Canada Revenue Agency (or CRA) can put a claim on all your assets if you don't pay your taxes, including seizing and selling your house!  Mortgage lenders don't like that as it puts them second in line to get paid back and there might not be enough money left over for that. 

Note that neither the CRA nor the bank will care about you if this happens - they are just going to squabble over who gets the house and the CRA is going to win.  So mainstream lenders will likely not lend you money if you cannot prove you are current with your personal income taxes! (This applies to all secured loans, including vehicles.)

What About An Unpaid Debt Collection?
If you have an unpaid collection item or judgment showing on your credit report, you won’t be approved for a mortgage until it’s paid in full.

Collection items are often the result of unpaid cell phone bills or speeding tickets. Even if you’re disputing these items, your best bet is to pay them upfront and then fight your battles after the fact.

Holding out on paying these debts will only hurt you in the long run, like when it’s time to get a mortgage.

Have questions? Feel free to reach out!

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