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To Pay or Not to Pay?

Property TaxIn a nutshell, property taxes must be paid. Property taxes are basically a secured debt – this means that they are tied to an asset, which in this case is the property itself. Falling behind or failing to maintain the payment schedule for your property taxes (usually four times annually if they are not paid through your mortgage) can result in heavy interest penalties (1.25% per month) and other serious consequences, the most severe being seizure and sale of your property if the taxes are in arrears (not paid) for three years.

Mortgage lenders often look disparagingly upon cases of property tax arrears. As part of your borrowing agreement, these lenders will insist/mandate that you keep your property tax payments current as well, particularly when paying your taxes outside of your mortgage installments, and they may refuse/decline to renew your mortgage should they learn that your property taxes are in arrears.

Are You Currently in Arrears? – Create a Repayment Strategy

Many municipalities offer some form of Tax Arrears Payment Plan (TAPP) designed to assist taxpayers in gradually repaying their overdue property tax accounts over a specified period of time (usually three to a maximum of five years).

These types of plans often include:

  • Pre-authorized monthly or bi-monthly payments (applied against all taxes owing plus penalties)
  • Provision to repay up to two-thirds of the outstanding arrears in the first two years of the plan
  • An option to make additional or lump-sum payments at any time
  • Ability to transition into a Tax Installment Payment Plan (TIPP) once all taxes are up-to-date

Tip: Before you consider, or apply for, a municipal tax arrears payment plan (TAPP), contact a mortgage professional for expert advice and guidance on the best option or options for your particular situation.

Are There Other Options?

If a municipal repayment strategy is not offered/not available to you, or it is does not extend the best or most appropriate solution for your financial situation, you could pursue one of these alternatives, upon consultation with mortgage specialist:

  • Obtaining a second mortgage – a short-term solution may be all you need
  • Borrowing the money – this will clear the arrears but interest fees may be prohibitive
  • Unlocking a pension fund – this may be possible, one time only, in the case of financial hardship
  • File a Consumer Proposal or Bankruptcy – although you must agree to surrender your home

To discuss a personalized plan designed to clear your property tax arrears, contact Natasha and her team of private mortgage brokers. Call us toll-free at 1-866-553-7467 ext 221 or 905-851-8871 ext 221. 

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