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.

That’s a question I imagine a lot of people ask themselves if they’re not familiar with what a broker actually does (or, if they’re feeling particularly bold and comfortable, they might even ask me directly).

From the outside, it doesn’t seem like a mortgage broker does very much. How hard could it possibly be to just pick the bank or lender with the lowest rate? It feels like something anyone with a basic understanding of counting could do.

“Hey mortgage broker, I’d like the lowest interest rate mortgage please.”
“Sure! There’s one here offering a 4.3% interest rate and one offering a 4.5% interest rate so I say, go with the first one.” That was easy.

I really wish it were that simple.

A mortgage broker like myself has access to many different lenders (by one count, more than 90) and it might be hard to believe, but they’re all different.

Sometimes the differences are big. There are lenders like some banks that only work with prime clients: great credit, solid work history, down payment from personal savings, and an easily marketable property. On the other end of the spectrum are lenders that specialize in people with no provable income who need a short-term loan for a fix-and-flip, often with interest-only payments to help manage cash flow.

Other times, the differences are much smaller. There might be five lenders offering nearly identical mortgages at the exact same rate, but you have a unique circumstance that only fits one lender’s guidelines. Maybe the property is too rural and only one lender will accept the location. Maybe you need a lender that will recognize AISH disability income or foster parent income. Or maybe you’re a perfectly prime applicant who simply wants the lowest rate and the best cashback offer.

Every lender is different. They have different guidelines, different rates, different lending areas, and different terms and conditions.

If two lenders offer the exact same rate, it might matter to you which one allows the largest prepayment privileges so you can pay your mortgage off faster. Or maybe you need the lender that makes it easy to access your paid-down principal because you have other plans for that equity.

Sometimes it gets even more specific. Maybe you’re buying a home and the realtor included a throwaway line in the MLS description about it being “a great place to raise chickens.” That single sentence can trigger automatic declines from many lenders that won’t lend on properties with farming activity. Even if there are no actual chickens on the property, you need to find the lender that will accept that chickens could be a possibility now that it’s been put in writing.

A mortgage broker needs to know the lenders, to understand their guidelines, to learn your unique circumstances, and to fit you into the mortgage that’s right for you.

I can’t always tell my clients that I can get them the lowest rate on the market, because not everyone’s situation qualifies for it. What I can say is: I’ll get the lowest mortgage rate for you.

And honestly, even then, choosing the lender is only one small part of the job – there’s also explaining the processes to clients, hand-holding (when needed, and absolutely something I don’t mind doing), problem-solving in many circumstances (Surprise! The client forgot to mention the five-figure tax bill they have outstanding and the condition date is two-days away), collecting/reviewing/organizing the paperwork and submitting it in the format required by each lender, fraud prevention, regulatory compliance and much more.

It would take many more blog posts to really go in depth on all of this. And maybe I’m a little crazy, but I find the complexity and uniqueness of the mortgage industry – and the clients I get to work with – incredibly interesting. So maybe I will write a few more posts and hope I can explain things in a way that not only gives you insight into the industry and processes, but also makes it incredibly interesting for you too.