That surprise five-figure tax bill from my previous post wasn’t a joke – it actually happened.

Before I continue, I want to be clear about one thing: not all the client stories I share on this blog are from my own clients. Some are, but others are situations I’ve heard about from fellow brokers, professional community groups, or common mortgage questions that come up online. Because personal finance can be sensitive, I never disclose the specific origin of any client story I tell.

Now, back to inescapable taxes.

It takes a little background knowledge to understand why a large outstanding tax bill can be such a big deal in a mortgage transaction. After all, we’re not accountants, and we don’t work for the CRA – so why should it matter?

The reason is that the CRA has financial “super-priority”. If a lender ever has to foreclose on a property, the CRA gets paid outstanding taxes even before the lender is able to collect any money back. (property tax arrears and condo fees also have super-priority). From a lender’s perspective, unpaid taxes represent real risk.

So discovering a significant tax balance just two days before the clients needed to remove their financing condition was a very big deal. Without a solution, the entire purchase could have fallen apart.

You might be asking, if owing taxes is such a problem, how did no one notice this bill until so far into the process? That question also needs a bit of context…

When a mortgage broker first starts working with clients, we have to ask for a lot of personal financial documentation: letters of employment, T4s, Notices of Assessment, bank statements showing down payment funds, and more.

It can feel like a lot to ask for up front, especially when everyone is just getting to know each other. But the home-buying process moves quickly, and if something isn’t requested and received early, it’s easy for it to be overlooked or lost in the shuffle until crunch time.

Fortunately for everyone involved, the clients had some breathing room as they had saved up 10% of the purchase price for their down payment.

The fix was to reduce the down payment to the minimum required 5% and use the remaining 5% to pay down the tax bill. It didn’t cover the full amount, so the clients also had to dip into their chequing and other savings account to cover the difference.

But in the end, the clients were able to pay off their outstanding taxes and move into their first home. And the mortgage broker involved learned a valuable lesson: even when it feels like a lot to ask for at the start, having all the necessary documents up front can make the difference between a smooth closing and a near-miss.