Will I have to break my existing mortgage to clear CRA debt?

Not usually. The borrowing is normally arranged in second position, so the existing first mortgage stays untouched - no break and no penalty. If you are holding a first mortgage at a rate you could not get today, breaking it to deal with CRA debt could cost more than the tax bill itself.

Answers › Debt Consolidation & CRA Arrears

I owe the CRA. Can a second mortgage clear my tax arrears?

Q: Can a second mortgage clear my CRA tax arrears?

Yes. CRA debt is the one debt banks won't touch, which is why a second or private mortgage is usually the route. Private lenders will often lend against your equity to clear it. Clearing it stops the penalties accruing and takes the collection pressure off.

Q: Why won't a bank refinance to pay CRA debt?

A bank looking at a file with CRA arrears sees a creditor with powers other creditors don't have, including the ability to register against property and to act directly on accounts and income. So the debt that most needs clearing is the one an A lender is least willing to fund.

Answered by Rajiv Verma, Mortgage Broker · Reviewed 13 August 2026 · About a 4 minute read

The direct answer

Yes. CRA debt is the one debt banks won’t touch — which is exactly why a second or private mortgage is usually the route. Private lenders will often lend against your equity to clear it. And getting the CRA off your back does more than tidy your balance sheet: it stops the penalties accruing and takes the pressure off.

THE SHORT VERSION

Banks generally won’t refinance to pay CRA debt. This is well established, and it surprises people.
Second and private lenders will, lending against your equity
Clearing it stops penalties and interest continuing to build
It also removes the collection pressure — which is often the bigger relief
The mortgage is short term, and needs an exit plan like any other private file

Why banks won’t help with this one

A bank looking at a file with CRA arrears sees a creditor who has powers other creditors don’t — including the ability to register against property and to act directly on accounts and income.

So the debt that most needs clearing is the one an A lender is least willing to fund. That’s frustrating, and it’s the reason people who could otherwise qualify at a bank end up in second-position or private lending for a term.

It’s worth understanding this isn’t a judgement on you. Plenty of people with CRA arrears are self-employed, had a difficult year, or fell behind during a period of disruption. The debt is a lending obstacle, not a character assessment.

How it usually works

We establish the real number — the balance, and what it’s growing by
We look at your equity — most lenders will go to about 80% of value in total, first mortgage included
The mortgage is arranged in second position, so your existing first mortgage stays untouched — no break, no penalty
The lawyer pays the CRA directly as part of closing
We plan the exit — what has to change to move back to B or A lending, and by when

Step 3 matters more than people realise. If you’re holding a first mortgage at a rate you’d never get today, breaking it to deal with CRA debt could cost more than the tax bill. A second mortgage leaves it completely alone.

Why clearing it early is worth more than it looks

The debt is still growing. Interest and penalties continue to accrue on an unpaid balance, so the number you’re comparing against the cost of borrowing isn’t static.

And it blocks other things. CRA arrears sitting on a file makes almost every other lending conversation harder — a refinance, a renewal, a purchase. Clearing it doesn’t just solve the tax problem; it unblocks everything else.

The pressure itself has a cost. Most people in this position describe the relief of it being dealt with as the main benefit, ahead of the arithmetic.

When this is the wrong move

When the CRA will agree a payment arrangement you can genuinely afford. That’s usually cheaper than borrowing. It’s worth asking before assuming a mortgage is the answer.

When there isn’t enough equity to do it properly. Borrowing to the very top of the value to clear a tax bill leaves you with no margin — and I don’t place files above 80% for exactly that reason.

When the underlying problem hasn’t changed. If the arrears built up because the business doesn’t generate enough to cover its tax, clearing them once just resets the clock. That needs an accountant alongside the mortgage.

When there’s no exit. A private mortgage to clear CRA debt is a one or two year step. If nothing will change in that time, we should be talking about something else.

What to check

The exact balance and what it’s accruing — from the CRA, not an estimate
Whether a payment arrangement is realistically available and affordable
Your equity position, honestly valued
The full dollar cost of the borrowing — lender fee, broker fee, legal, appraisal, registration
Whether the cause has been addressed, so it doesn’t rebuild
The exit plan — what has to change, and by when

What to do next

Send me the balance, your mortgage details and a rough value on the property. I’ll tell you whether the equity supports it, what it would cost in dollars, and whether a payment arrangement with the CRA would serve you better.

This is a common situation and a solvable one. It’s worth dealing with sooner rather than later, because the balance doesn’t stand still.

Talk it through →

Related questions

Answered by Rajiv Verma, Mortgage Broker · Mortgage Architects — FSRA Brokerage Licence #12728 · Licensed in Ontario · Office 289.505.0631 · Direct 647.291.7116

General information about Ontario mortgages — not financial, legal, tax or mortgage advice. Speak to your accountant about your tax position and to the CRA about payment arrangements. Every file is reviewed individually.