Banks and most B-lenders will not refinance a home with a registered CRA lien. Many decline any file with unpaid tax arrears. A private second mortgage (or a new private first) pays CRA directly through the lawyer at closing. CRA issues a discharge. The lien comes off title the same week. Cost in November 2026: 9.49-13.99% interest-only plus a 2-3% lender fee, a 1-2% broker fee and $1,500-2,500 legal, for 12 months. By then the returns are filed, the debt is gone, and a B-lender or bank can refinance everything into one mortgage. It funds in 7-14 days. CRA will often hold collection action once a funded commitment is in hand.

Why the bank says no, and why a private lender says yes

A CRA lien (a certificate registered against your property under the Income Tax Act or Excise Tax Act) ranks ahead of any new mortgage. For some kinds of tax it ranks ahead of existing ones. No A-lender will register behind it. Unpaid arrears without a lien are almost as bad: lenders see a creditor who can garnish income, freeze accounts and register at any time. A private lender's position is simpler. It lends on equity. It requires the tax debt to be paid from the advance so the lien is gone the day the mortgage registers. And it gets repaid in 12 months from a refinance that is now possible because the CRA problem no longer exists.

Not all tax debt is the same

Type of debt	Who owes it	What lenders worry about	How it is handled
Personal income tax arrears	You	Lien on title; garnishment of wages or accounts	Paid from the advance; lawyer gets the payout figure from the collections officer
Corporate income tax	Your company	Director liability is limited; less concern unless a lien is on the house	Often paid from the advance to stop the company's accounts being frozen
GST/HST and payroll deductions	Company; directors personally liable	"Deemed trust": CRA can rank ahead of existing mortgages; the most dangerous kind	Must be paid at closing; lenders will not fund with it outstanding
Unfiled returns, amount unknown	You	Lender cannot size the risk	File first (an accountant can do several years in a week), then fund; some lenders fund on an estimate with a holdback

A Surrey contractor's file, with the numbers

Item	Amount
House value (appraised)	$1,050,000
Existing first mortgage at 4.69%, stays in place	$520,000
CRA: three unfiled years, assessed with penalties and interest	$84,000
Accountant to file and negotiate penalties	$3,500
Credit cards used to keep the business going	$22,000
Private second mortgage, 12 months, interest-only at 11.49%	$120,000
Lender fee 2% + broker fee 1.5% + legal and appraisal $2,400	$6,600
Net advance after fees; CRA and cards paid by the lawyer at closing	$113,400
Combined loan-to-value	61%
Monthly interest-only payment	$1,149
Total cost over 12 months; APR	$20,388; 16.99%
Exit at month 12	B-lender refinance of $640,000 at about 6.9% on filed returns

The $20,388 is real money. It is also less than the garnishment, the frozen account and the lost contracts that come with an unresolved CRA file. It is the only route that gets the lien off. The honest alternative, a consumer proposal that includes the CRA debt, is on the consumer proposal page. It can be cheaper when the equity is thin or the debt is far bigger than the equity.

Step by step

Day 0

Call with the CRA letters

Notice of assessment, statement of account, any lien registration, mortgage statement.

Day 0-3

Payout figure from CRA

Your lawyer or accountant gets the exact payout from the collections officer. Interest runs daily, so the figure is dated.

Day 1-2

Commitment and fee sheet

Lender commitment conditional on CRA being paid from proceeds. Disclosure two business days before signing.

Day 3-8

Appraisal and lawyer

Your lawyer gives independent advice and coordinates the CRA payment and the lien discharge.

Day 7-14

Funding

Lawyer pays CRA, gets the discharge, registers the mortgage. Garnishments stop.

Province notes

BC

CRA liens are registered at the Land Title Office. Discharge takes a few days after payment. Self-employed trades, truckers and realtors in Surrey and the Fraser Valley are the commonest CRA files we see. BC page.

Alberta

Alberta Land Titles discharges can take longer. We build that into the lawyer's timeline. Oil and gas contractors with GST arrears are a frequent profile. Alberta page.

Ontario

The deepest market for CRA-payout seconds. FSRA's two-business-day borrower disclosure applies. FSRA's APR rules mean your disclosure shows the all-in cost. Ontario page.

CRA tax debt mortgage questions

Can I refinance with a CRA lien on my house?

Not with a bank or most B-lenders while the lien is registered. With a private lender, yes, on condition that the lien is paid and discharged from the mortgage proceeds at closing. The lawyer handles it.

Does the lawyer pay CRA directly?

Yes. The payout to CRA is a line on the closing statement, paid from the lender's funds in trust, with the discharge obtained before or right after registration. You never handle the money. The lender will not fund any other way.

Will CRA stop garnishing my income once the mortgage is approved?

Usually, once a collections officer sees a funded commitment letter with a closing date, they hold further action for a short period. They are not obliged to. A call from your accountant with the letter in hand works best.

Is the interest deductible?

Generally no. Money borrowed to pay personal tax is not borrowed to earn income. Corporate tax paid by the company with money the company borrowed may be treated differently. Ask your accountant.

I have not filed for three years. Can I still get this?

Yes, but file first. Lenders need a number. An accountant can file several years in a week or two. Voluntary disclosure can reduce penalties. Some lenders fund on an estimate with a holdback released when the assessment arrives.

Sources. Income Tax Act s.223 and Excise Tax Act s.316 (certificates and liens); deemed trust provisions · Ross Taylor Mortgages, CRA debt and new mortgages · Lendworth, CRA tax arrears and lien priority · Harris & Partners, CRA and consumer proposals · Mortgage Directory private rates, October 2026.

Real people, not a call centre

Talk it through with a licensed broker before you decide

Tell us what is going on in a few lines. We call you back the same day with what lenders will say, what it costs in dollars, and how you get back to a bank. If private is the wrong tool, we say so.