November 08, 2022

Property Taxes: Everything You Need to Know

When you own a home, there are a lot of things you need to pay for – mortgage, insurance, repairs, and property taxes. Property taxes are one of those expenses that can be difficult to understand. How are they calculated? What happens if you don’t pay them? Can the county seize your home if you don’t pay your property taxes? In this blog post, we'll answer all of your questions about property taxes so that you can be prepared come tax season.

How Are Property Taxes Calculated?

Property taxes are typically calculated as a percentage of the value of your home. The assessment rate may vary depending on the municipality in which you live. For example, in Ontario, the municipal rate is 0.5%, while the education rate is 0.2%. So, if your home is valued at $400,000, your annual property tax bill would be $2,000 ($400,000 x 0.5% = $2,000).

What Happens If You Don’t Pay Your Property Taxes?

If you don’t pay your property taxes on time, you will be charged a late payment penalty. The amount of the penalty varies by municipality, but it is typically around 10% of the outstanding tax bill. So, if your property tax bill is $2,000 and you don’t pay it until two months after the due date, you would owe an additional $400 in penalties ($2,000 x 10% = $400).

In addition to late payment penalties, if you continuously neglect to pay your property taxes, your municipality may eventually seize your home. This process usually takes several years and multiple attempts to collect the outstanding debt before seizure proceedings begin. However, it is important to note that municipalities will almost always work with homeowners who are struggling to pay their property taxes to come up with a payment plan or some other arrangement before taking such drastic measures.

Is My Mortgage Company Responsible for Paying Overdue Property Taxes?

No – it is the homeowner's responsibility to ensure that their property taxes are paid on time. If you fall behind on your property tax payments, your mortgage company will not be responsible for paying them off. However, if your municipality does eventually seize your home for unpaid property taxes and the sale of the property does not cover the entire outstanding debt (including penalties and interest), then the mortgage company may seek reimbursement from you for the difference.

Can a Mortgage Lapse Because of Non-Payment of Property Taxes?

If you have a standard mortgage with monthly payments spread out over a period of 25 years or more, then missing a few months’ worth of property tax payments should not affect your ability to make your regular mortgage payments or cause your mortgage to lapse. However, if you have an accelerated mortgage with weekly or bi-weekly payments, then falling behind on your property tax payments could put you at risk of missing mortgage payments and ultimately causing your mortgage to lapse.

Property taxes are an important part of owning a home but they can also be confusing and sometimes overwhelming – especially if you get behind on payments. We hope that this blog post has helped clear up some of the confusion surrounding property taxes and given you a better understanding of how they work. If you have any further questions or concerns about property taxes or any other aspect of homeownership, please don’t hesitate to reach out to us – we’re here to help!