Any debt owing to the CRA is going to raise caution flags.
But it should be noted that GST amounts owing are of particular concern to lenders. If you have a borrower who is business for self, as a broker, you should prepare them to answer a lot of questions about the CRA and GST.
And there is good reason for this.
If your borrower is behind or worse, not remitting at all, these sums can rank ahead of a mortgage. This will cause an issue for the mortgage despite the sums not being registered on title. What this means for a lender is that there needs to be as much certainty as possible that at closing, all sums owing to Canadian Revenue Agency for GST have been paid. Lenders like certainty. Providing them with proof that any debt that may rank above the mortgage is paid is extremely important.
The requirements for proof of this will vary from lender to lender. Some lenders may require the proof to come in the form of a letter from an accountant. Or simply, a printout of their regular GST remittances and as well as other types of proof.
This applies not only to sole proprietors but also to incorporated businesses. As directors of companies can still be liable for the GST of their companies.
Therefore, as a broker, when you find yourself meeting with a Business-For-Self borrower, it’s a good idea to encourage them to put all this information together as soon as possible. It’s highly likely that they’ll need it when the lender reviews their application.
And as always, if you have any questions, be sure to speak to your lender. The underwriting experts at Kokanee Mortgage have decades of knowledge and experience to help find a solution to all your lending concerns.