GST And Source Deductions In Lending

GST and source deductions are a big deal for lenders.

But have you ever wondered why lenders will ask business-for-self borrowers for GST and Source Deductions (payroll) information? After all, if the income and value for the property can be established, why ask those questions?

In simplest terms, it’s because the amounts that a business owner owes the government for GST and source deductions can actually 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.

For lenders, this can often be a deal breaker.  The CRA holding priority over them would put them in a bad situation in the case of a foreclosure.  This especially true for traditional lenders.

What can actually make things even more difficult in these situations is that there is no need for a formal process, documentation, or registration for CRA to assert this priority.  It just happens automatically by operation of law.

Okay, but 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 that they’re remitting regularly.  The same will be true for the remitting of their source deductions.  By submitting the appropriate documents to ensure remittances are up-to-date, the lender’s requirements should be satisfied.

Here at Kokanee Mortgage, we are committed to supporting self-employed borrowers find ways to satisfy the requirements for GST and source deductions.  Not to mention other issues that may arise for business-for-self borrowers.

If you’re working with business-for-self borrowers, the underwriting team at Kokanee Mortgage are always ready to help. We can find simplified solutions to complex challenges.  Our decades of experience and knowledge can help find creative solutions to your biggest lending problems.