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How To Use a Second Mortgage To Pay Off Income Tax

It is no surprise that income taxes in Canada are particularly high. According to the Canada Revenue Agency (CRA) for 2018, the income tax required if you earn up to $46,605 is 15%. If you make up to $93,208, you owe 20.5%, and 26% is owed if your income is up to $144,489. If your taxable income is between $144,490 and $205,842, you owe 29% and your federal income tax rate is 33% if you make over $205,842.

With these high tax rates, it can be difficult paying the CRA out of pocket. Therefore, it is important you are organized with your finances. The last thing you want is to fill out your tax form and realise you cannot pay the CRA the amount you owe. Failing to pay your taxes can result in hefty fines and up to five years in prison. So to avoid this potential nightmare, Lotus Loans & Mortgages experts have listed how you can use a second mortgage to pay off your income tax.

Paying Off Your Income Tax

Nobody wants to be charged a fee or face jail time, so before it gets to that point you should take out a second mortgage on your house to pay off your income tax. This can be done by accessing the equity in your home. Your home’s equity is the difference between what you owe towards your mortgage and your home’s overall value. Your home equity can increase if the property value increases, which generally occurs over a period of time. Or it can increase whenever you make a monthly mortgage payment. Your home equity is the true value you own on the house.

Getting Started

To get started, talk with your local Brampton mortgage broker to go over your finances and see if you can financially afford to take on a second mortgage. Once the mortgage application process is finished you will have access to a certain percentage of the equity in your home, which can then be used to pay off your income tax.

Contact Us

For more information on how a second mortgage can help you pay off your income tax, please contact the Lotus Loans & Mortgages Group at 905-791-1100.

What To Pay Off With Your Second Mortgage

There are countless mortgage options available on the market today, one of which is a second mortgage. A second mortgage is when you take out an additional loan on your house to access the equity in your home. The two most popular ways this can be done is through refinancing or by obtaining a home equity line of credit (HELOC).

Once you have talked with your Brampton mortgage broker, and have been approved for a second mortgage, you can start tapping into your home equity and spend your funds however you want.

Home Equity

A second mortgage allows you to access the equity in your home without you needing to sell your house. Your local broker will go over your finances and tell you how much home equity you have available, or you can figure it out by subtracting the balance of your loan with your home’s overall value.

You will typically need to have at least 20% equity in your home in order to receive low rates on your second mortgage. Your rates are also determined by your income and credit score. For more information on mortgage interest rates please call 905-791-1100.

What To Pay Off With Your Second Mortgage

So now that you have been approved for a second mortgage, you may be wondering how you should spend your loan? There are many ways you can spend the large sum of money that is available to you. It is common for borrowers to pay off large amounts of credit card debt, car loans or student debt.

You can even use your second mortgage to pay off your income tax. For more information on paying off your taxes, please see the Lotus Loans & Mortgages blog post titled “How To Use A Second Mortgage To Pay Off Income Tax.”

Other homeowners will take out a second mortgage to pay off property tax arrears, or other real estate debt in order to avoid receiving huge fees by the Canada Revenue Agency (CRA).

Contact Us

If you would like to know more information on what to pay off with your second mortgage, please contact the Lotus Loans & Mortgages team at 905-791-1100.

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