What Can You Do If You’ve Got a Revenue Canada Lien?
A tax lien is never welcome. If you’ve accumulated significant Canada Revenue debt and haven’t been able to pay it for a long time, a Revenue Canada lien may be unavoidable. While the government prefers to avoid taking legal action, an ignored debt will eventually prompt it to act. Unfortunately for homeowners, one of the collection actions available to the Canada Revenue Agency (CRA) is to register a claim on the title of your real property. For a full overview of CRA collection powers, see our guide to Revenue Canada debts and liens.
A Canada Revenue lien is only registered when a tax debtor fails to pay their bill, and it can have a big impact if left alone. If you do nothing about the lien and your primary mortgage comes up for renewal, you may run into trouble, because your existing lender may decline to renew once they see CRA has registered a lien against your home.
We recommend finding a way to pay out a Revenue Canada lien as soon as possible, and we can help you do it. Equity is the key, and it’s likely you have some, because CRA would not have registered a claim against the title otherwise. If you want the broader strategy, our guide on paying off CRA debt using home equity covers your full range of options, while this page focuses on the payout and discharge process itself.
How Do You Pay Out a Revenue Canada Lien?
While there are a few ways to pay out a Revenue Canada lien, the best option depends heavily on your circumstances. Your current income, available credit, and savings will determine whether you can work out a payment arrangement that satisfies CRA so they will lift the lien.
If you have enough income or savings to make it work, that can be a win. You’ll pay interest on your balance, but you can work directly with the government to service your debt. Chances are, if you could do this you already would have, and you wouldn’t be reading this article.
Your alternatives to negotiating a payment arrangement directly with CRA include:
- Liquidate an asset such as an RRSP.
- Borrow from family or friends.
- Sell your home.
- Refinance your mortgage.
Of all the available options, refinancing gives you the most control, preserves your retirement savings, lets you keep your home, and avoids awkward conversations with family. Remember, if you do nothing about your tax lien, the government could eventually pursue a forced sale of your home to service the debt.
Refinancing to Remove and Pay Out a Revenue Canada Lien
The other options are not ideal for most people. Who wants to ask their loved ones for money? Why sell a home you like and worked hard to own? Borrowing from your future self isn’t any better, since you don’t want to come up short at retirement, especially if you don’t have many working years left.
Refinancing is often one of your best options. It’s one of the simplest solutions available, and an essential one for those who need it most. Even with bad credit or a recent job loss, if there is equity in your home, we can help you find a lender who will help you clear the debt.
Should You Ask Your Bank First?
We always recommend using a broker to find the best fit. Good credit or bad, high income, low income, or none, a broker can help.
While traditional banks generally do not allow consumers to refinance to pay out Revenue Canada liens, many alternative and private lenders will. The benefit of working with a mortgage broker is that we know which lenders allow these payouts.
A large number of lenders will allow a lien payout, and they offer a range of products to choose from. For example, if you would face large penalties to break your first mortgage, our lenders can offer a second mortgage or secured line of credit that your bank isn’t likely to recommend. By preserving your existing first mortgage rather than paying it out early, we help you avoid unnecessary fees, and work around the stricter stress-test rules major banks must follow. You still clear your Revenue Canada lien, but your first mortgage stays intact.
Pay the Taxes and the Lien Will Be Released
If you owe money and can’t negotiate an installment agreement or a compromise for the full amount, we can help you deal with your income taxes. Once a lien attaches to your property, it becomes harder to work with CRA. In these cases, a home equity loan or second mortgage really can be the best solution. A clean start, free of income or excise tax debt (for business owners), is possible.
You could always consider bankruptcy or a consumer proposal, but if you have equity you can pay out the lien without an insolvency event on your record. Why put yourself through an unnecessary bankruptcy when you don’t need to? It can be expensive, and bankruptcy costs increase when you have assets such as home equity. It’s also worth knowing that bankruptcy typically cannot remove a CRA lien on its own, because a registered secured claim is treated separately from unsecured debts like credit cards.
Working with TurnedAway to Pay Out a Lien
Our experts have many years of experience helping people in exactly this situation. If you have an unwanted lien registered against your property, we can help you find a solution.
Trust a mortgage broker to shop around for the right fit, and don’t worry about your credit score or income. At TurnedAway.ca, we are well-versed in the art of equity-based lending. We don’t disqualify you for bad credit or unpaid bills, and we look at your equity rather than leaning on your credit report. If you have enough equity, we can help you get a fresh start. Whether the Revenue Canada lien is on a home, commercial property, or even a piece of vacant land, we offer free consultations to get you back on track.
Frequently Asked Questions: Paying Out a Revenue Canada Lien
Can I pay out a CRA lien without paying off my whole mortgage?
Yes. In many cases the best approach is a second mortgage or secured line of credit registered behind your existing first mortgage. This lets you pay out the CRA lien while leaving your first mortgage, and its rate, untouched, which avoids the penalties of breaking it early. A broker can source lenders who allow this structure.
How is the lien actually removed from my title after I pay it?
Once CRA receives full payment of the certified debt, it issues a discharge, and the lien is removed from your property title. When the payout is funded through a refinance or second mortgage, the lawyer handling the transaction typically directs funds to CRA and confirms the discharge is registered, so your title is cleared as part of closing.
Will my bank refinance a home that has a CRA lien on it?
Usually not. Most traditional banks will not refinance to pay out a Revenue Canada lien, which is why homeowners in this situation turn to alternative and private lenders. These lenders focus on your home’s equity and marketability rather than your credit score, and they are set up to handle lien payouts directly.
Does paying out a CRA lien this way hurt my credit?
Paying out the lien through home equity lets you resolve the debt without an insolvency event like bankruptcy or a consumer proposal on your record. The underlying tax situation may already have affected your credit, but clearing the lien removes the biggest obstacle to future borrowing and lets you rebuild.
Can I pay out a lien on commercial property or vacant land, not just my home?
Yes. Equity-based lenders can arrange payouts against a range of property types, including commercial property and vacant land, not only your principal residence. The key factor is available equity and the marketability of the property securing the loan.
Contact us today to pay out a federal tax lien owed to CRA, or apply online to get started.
