Tax debts are different from other debts. The Canada Revenue Agency and your municipality have collection powers ordinary creditors don’t, and the interest and penalties keep adding up. If you own a home with equity, a private mortgage can clear the balance in one step.

Why tax debts are urgent

CRA debt

Unpaid income tax, GST or payroll remittances accumulate interest and penalties. The CRA has strong collection tools and can take action without going to court the way other creditors must. It’s much better to deal with a balance before collection steps escalate.

Property tax arrears

In Alberta, municipalities have a legal process to recover unpaid property taxes that can eventually lead to the property being sold. Your mortgage lender may also treat unpaid property taxes as a default on your mortgage, because tax arrears can take priority over the mortgage itself.

Why banks often can’t help

Tax arrears are a red flag for most banks and alternative lenders. Many won’t refinance until the taxes are paid, which is hard to do without the refinance. Private lenders can be more flexible, often paying the tax debt directly from the mortgage funds at closing.

How it works

  1. Get current statements from the CRA or your municipality showing exactly what’s owed.
  2. Apply for a private first or second mortgage large enough to cover the balance and costs. See private second mortgages.
  3. The lawyer pays the tax debt directly when the mortgage funds.
  4. You receive confirmation the balance is cleared.

What lenders want to see

  • Current tax statements and any collection letters
  • How the debt happened, and why it won’t happen again
  • That the new payment is manageable
  • Your plan to refinance later. See your exit strategy.

Preventing it next time

  • Self-employed? Set aside tax money in a separate account. See self-employed private mortgages.
  • Property taxes: many Alberta municipalities offer monthly payment plans.
  • Talk to an accountant about instalment payments.

Don’t wait

Each month adds interest and penalties, and collection steps can narrow your options. A licensed broker can tell you quickly whether a private mortgage can clear the debt.

This article is general information, not financial, legal or tax advice. Lender requirements, rates and fees change and depend on your situation.