Why Is The Lender Asking Asking About GST And Source Deductions?

Have you wondered why lenders are asking your business-for-self borrowers for GST and Source Deduction (payroll) information?  After all, if the income and value for the property can be established, why ask those questions?

Simply put, amounts that a business owner owes the government for GST and Source Deductions can rank ahead of a mortgage.  In other words, even though a lender may be registered on title in 1st priority, they may in fact only have a 2nd financial charge on the property.  What makes things even more difficult is that there is no need for a formal process, documentation or registration required for CRA to assert this priority.  It just happens automatically by operation of law.

So, enough legalese; how do we deal with this situation?  For business-for-self borrowers we will ask for confirmation that the borrower is registered for GST and we’ll want evidence that they’re remitting regularly.  The same goes for Source Deductions.   It’s not a perfect system and there is still risk to a lender even with our due diligence.  However Kokanee Mortgage is committed to supporting business-for-self borrowers and finding ways to satisfy the requirements for GST and Source Deductions.

If you’re working with self-employed borrowers, the underwriting team at Kokanee Mortgage are always ready to help find simplified solutions to complex challenges.