Employee Housing Loans

Employee Housing Loans

An employee housing loan refers to any loan that you can get from your employer to buy a home.

This is quite convenient, considering employers offer housing loans at incredibly low-interest rates. Applying for a housing loan not only allows you to buy a conventional house but also empowers you to purchase other dwellings, including: 

  • An apartment in a duplex or apartment building

This housing option is ideal if you work in a large, densely populated metropolis, where commuting from a distant suburb might prove inconvenient. 

  • A condominium

This option is great if your job role entails maintaining a high social status. 

  • A cottage

A cottage would likely function as your vacation residence. 

  • A mobile home

If you are an outdoors type and enjoy road trips then owning a mobile home is a viable purchase

  • A trailer

A trailer can function as your onsite residence mainly if you work in the construction, utility, drilling, or similar industry. 

  • A houseboat

If you have always wanted to live on a floating abode, you would certainly consider owning a houseboat. 

  • A vacation home

You may decide to buy a full-sized house as a secondary dwelling while on vacation. 

  • A share of a cooperative housing project

As with apartment buildings, living in a housing project is often convenient while working in a major urban city. 

Now that you have an idea of the kind of dwelling you can buy with a home loan, it’s time to dive into the details.

Nature of Employee Housing Loans


Your employer will offer you a home loan for use in two main ways: –

  • Personal Use 

The home directly benefits you, the employee, making you its owner upon completion of your home loan payments. 

  • Use by Close Relatives 

You want close family members to use the dwelling that you purchase with your housing loan. 

However, your employer won’t give you an employee housing loan if you intend to buy your sweet aunt a house. 

Why not? Your aunt practically raised you. 

The answer: Employer-imposed restrictions on who qualifies as a close relative. 

Your employer will consider someone to be your close relative if he/she is: – 

  1. An Immediate Family Member 

You can purchase a house for your children, brother, sister, or parents, but not your extended family. 

Your sweet auntie, your favorite cousin, the uncle who’s always brought gifts on birthdays and other distant family members, therefore, doesn’t qualify. 

  1.  A spouse or common-law partner

Luckily, you can buy a house for your legally married spouse or common-law partner.

Furthermore, other eligibility restrictions that can make or break your employee housing loan application. The most significant of these are: – 

  • You are a shareholder-employee

This means you do not own share capital in your employer’s company. This provision protects your employer from tax obligations related to issuing loans to shareholders. 

  • You agree to sign a written agreement for the loan.

This is a Promissory Note, which sets out the total loan amount, interest rate, payment amounts, payment frequency, and what happens if you default on paying the loan.

  • You have a mortgage in place.

Your employer also requires a mortgage contract for the home you want to purchase as valid proof of intent when you get the loan. 

What benefits can you expect from your employee housing loans other than the low-interest rate?

 The next section answers this question.

Taxable Benefit in Employee Housing Loans

Some of the taxable benefits you can expect from your employee housing loan include: – 

  • Tax relief at a 2% rate

Your housing loan repayments are deducted from your total monthly tax obligation; a government incentive meant to encourage people to become homeowners. This tax relief is calculated at the same rate as the total loan amount, i.e., at 2% interest. 

  • The taxable relief locked in for a maximum period of 5 years.

The interest rate on your housing loan is locked in for the repayment duration, typically 5 years. You, therefore, qualify for monthly tax relief for the same period. 

For example, if you get a $100,000 loan, your yearly taxable benefit would only be $2,000. If you pay this amount of interest to your employer, there would be zero taxable benefits. 

The next two sections of this article look at two interesting facts on housing loans for employees.

Non-Shareholder Employees Vs. Owner-Managers 

As a non-shareholder, you are better placed to access employee housing loans than a fellow employee with shares at the company, i.e., an owner-manager. 

The CRA taxes the employer for the loan and negates all potential tax benefits to the shareholder-employee/owner-manager. 

This occurs because the CRA views loan repayment made by shareholder-employees to their employer as phantom income/undeclared income.

Differentiating Between Housing Loan and Home Relocation Loan

It’s essential that you not get confused by two loan facilities that employers offer their employees: Housing Loans and Home Relocation Loans. 

A home relocation loan is a loan you get from your employer as an incentive to buy a home that’s at least 40 kilometers nearer to your new work location. 

On the other hand, a housing loan does not feature this incentive but is also meant for the purchase of a house. 

 There is another difference related to how the CRA treats the two. 

While all the payments on your employee housing loan feature a 2% tax relief, the CRA only exempts the first $25,000 of the principal amount for home relocation loan. 

However, this was DISCONTINUED in 2018

Learn more about Employee Housing Loans by talking to a tax law expert.

Call Rotfleisch & Samulovitch PC Today to Consult About Employee Housing Loans

You can contact Rotfleisch & Samulovitch for all your employee housing loan queries, including individual income tax and business law. 

We offer an incredibly vast range of services that will benefit you when contemplating an employee housing loan. These services include tax planning, tax structuring, tax filing and tax amnesty application/voluntary disclosures.

You can get in touch with our expert team of tax lawyers using one of five possible approaches. You can call us, fax us, email your queries, physically visit our Toronto offices or simply fill out our online contact form at https://taxlawcanada.com/contacts/. 


“Employee housing loans can be tricky. Always talk to a tax law expert before jumping into a loan arrangement.” 

FAQs on Employee Housing Loan

What does a taxable benefit mean? 

A taxable benefit refers to any deduction made to tax that you are expected to pay. This decreases your total tax obligation. In the case of employee housing loans, a percentage of the monthly payment you make for the loan is deducted from your tax per month. This percentage is 2% in Canada. 

Can a part-time employee take advantage of an employee housing loan? 

Some employers do allow their part-time employees to access employee housing loans. As with full-time employees, part-time employees must also sign a promissory note stating the total loan amount, loan interest rate, monthly repayment amounts, and possible penalties when the part-time default on the loan. 

Can a self-employed individual take advantage of an employee housing loan?

A self-employed individual cannot benefit from an employee housing loan.

If I am a long-term contractor or an outsourced employee, will I be eligible for an employee housing loan?

Normally, you’d need to be contracting for at least two years before you could get a home loan but it all still depends on the employer. Some employers do allow their part-time outsourced employees to access employee housing loans. Part-time employees must also sign a promissory note stating the total loan amount, loan interest rate, monthly repayment amounts, and possible penalties when the part-time default on the loan.

Can I apply for an employee housing loan and convert the property for commercial use?

Your employer won’t give you an employee housing loan if you intend to buy it for commercial use. Your employer will only offer you a home loan for personal use or use by close relatives.

Can I resign while I am on an employee housing loan agreement?

It all depends on the contract loan agreement between the employer and the employee. Employee housing loans can be tricky that’s why you should always talk to a tax law expert before jumping into a loan arrangement.

Can I borrow money from my business to buy a house?

You can’t use a business loan to buy a residential home. Part of the lending criteria that you agree to involves using that loan for business purposes. This means that your lender will ask about those purposes before they approve the loan. Banks will only accept business loans when they’re used for business purposes. Also, the banks don’t want a business owner to drain their business account to buy a home, and then go out of business because they have no working capital.

Are employee loans taxable?

Yes, an employee receives a taxable benefit if the employer gives them a loan because of an office or employment or intended office or employment.

Is an employee loan an asset?

Yes, an advance paid to an employee is essentially a short-term loan from the employer. As such, it is recorded as a current asset in the company’s balance sheet.