Property Taxes: What to Expect

In Canada, everyone has an opinion about property taxes. Whether city dwellers or rural folk, each side will argue that the other is not paying enough in property taxes, making for a heated and spirited discussion about levies on the residence you worked hard to purchase.

That said, aside from discussions over what the property tax rate should be, this is an important subject since many prospective homebuyers do not consider their annual tax bill as part of their ongoing expenses, whether they own a condominium or a single-family home, which could hurt their wallets in the future.

Planning for annual property tax payments is just as important as researching the rate on your mortgage or determining what your closing costs will be at the end of the home-buying process.

So, what do you need to know? We have compiled a guide for what you need to know about property taxes in Canada.

Property Taxes: What to Expect

Here are five things you should expect about property taxes in your housing market:

#1 Check the Rate in Your Area

One of the best ways to determine the property tax in your area is to visit the municipality’s website. Typically, the web portal will include a calculator and a list of rates. This will provide you with how much you can expect to pay using the Current Value Assessment of your property that the Municipal Property Assessment Corporation figures out.

#2 How to Pay Your Property Taxes

These days, there are many different routes you can take to complete your property tax payments. In addition, it has become a lot simpler these days, with municipalities finally catching up with the times.

Here are your payment options:

  • Online banking
  • Telephone banking
  • Automatic teller
  • In-person

In some places, you can also pay by check.

Often, your mortgage lender will collect your property taxes from you with every mortgage payment and submit them to your municipality on your behalf.

#3 What Do Your Property Taxes Cover Anyway?

Every province or municipality uses revenues from property taxes to cover different needs. So, for example, in the province of Ontario, homeowners will pay property taxes each year to cover the costs of public education, infrastructure, garbage collection, snow removal, and public services (police, firefighters, ambulances, and more).

#4 Consequences of Not Paying

You are required to pay property taxes. There is no other way around it. While your residential property could be seized by the government and sell it to get back the tax revenues, this process is rarely utilized since it can take several years to complete.

But it does not mean the government will give up. Instead, you are generally charged 1.25 percent each month. If you do not pay this fee and the overall tax bill, the collection process begins. You may also have a lien placed against your home.

Some jurisdictions might register a Tax Arrears Certificate if you have refused to pay your obligations after a few years.

#5 Can You Afford Property Taxes?

When searching for a home, you will generally consider the sale price, the mortgage rate, interest payments, fees and charges associated with the mortgage, utilities, etc. But what about the property taxes? The total amount can be challenging to crunch in advance but knowing the percentage in your town or city can make the estimation easier to put together.

For example, the property tax rate is about 0.61 per cent in Toronto. So, if you own a $1 million home, you will be forking over a little more than $6,000 each year. Everyone’s situation is different, and life can come at you pretty fast. In other words, you should calculate this in your budget when you are in the market to acquire a new residential property.

And don’t forget, in Toronto, you will have to pay the municipal land transfer tax, which can climb all the way to four per cent for home purchases worth between $400,000 and $2 million. This is in addition to the Ontario provincial land transfer tax.

Get Ready for Property Tax Hikes?

In the aftermath of the coronavirus pandemic, provincial and municipal governments need to develop different revenue tools to refill the coffers, reduce deficits, and trim their debt totals. Nova Scotia introduced new property taxes for non-residents, Toronto has been pressured to raise its property taxes, and city councils are assessing various property tax schemes and hikes.

When inflation is high and Canadian real estate market prices continue to soar to the moon; public policymakers are generally hesitant to increase property taxes. But they might not have any other choice in the future if fiscal pressures become prevalent during the budget creation process each year.


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Key Things to Avoid After Applying for a Mortgage

You’ve assessed your finances and the housing market and researched the various financial options open to you and your household. Then, you took the leap in applying for a mortgage – quite possibly the most significant money-related decision of your life. Now you play the waiting game.

This waiting period is perhaps one of the hardest parts of the home-buying process, determining if you have been approved or rejected for a home loan. While it can be challenging, you can be confident in your prospects if you have taken the necessary steps and employed the right strategies to receive approval and attain the best mortgage rate.

But it is not time to throw caution to the wind. In fact, you need to be more careful and judicious in what you do with your finances until you receive the funds to purchase, whether it’s a single-family home in Mississauga or a two-bedroom condominium in the Toronto housing market.

So, what are some things you should do? Or better yet, what are some things you should avoid doing, after applying for a mortgage? We have compiled a list of critical aspects you need to consider moving forward.

Key Things To Avoid After Applying for a Mortgage

#1 Avoid Making Large Purchases

You might have had your eyes on a luxury vehicle. You may have wanted to purchase new furniture for your new home. You may even have wanted to change your entire wardrobe in anticipation of your new roots in a different neighbourhood, city, or province.

Avoid making large purchases. This is because any significant cash outflow can impact your broader finances. Remember, when you take on a $500,000 mortgage, you are also enduring new monthly obligations, meaning that your debt-to-income ratio will be higher. This is what lenders monitor.

#2 Don’t Co-Sign Other Loans

You may want to help your best friend receive a new car loan or help your aunt get approved for a line of credit by co-signing these credit products. But this can be dangerous since co-signers are legally obligated for these loans if the borrower cannot fulfill their financial obligations.

#3 Refrain from Applying for New Credit

Be it a new credit card or a personal line of credit, one thing you should refrain from doing at this time is applying for new credit. Even if it is something you can afford, a check on your credit report will show that you have applied for new credit, which may affect your credit rating or score.

Remember, you want to have as high a credit score as possible. Even a slight reduction could affect your mortgage application odds. In the interest of a top-notch score, refrain from seeking out additional credit instruments until after you’ve closed on your purchase.

#4 Wait to Change Bank Accounts

Indeed, you might be enticed to change bank accounts because of a promotion or better interest rate, but this is something best left for another time. It would be more prudent to maintain your present suite of bank accounts because mortgage lenders want to source and track your assets and debts, which is easier done through a steadily held bank account.

#5 Keep Your Credit on Ice

By cancelling a credit card, do you think you can enhance your credit score and, thus, improve your odds of being accepted for a mortgage? Well, think again.

It is a common misconception that limiting your credit options can somehow work in your favour. But it is best not to close any credit accounts or cut up your credit card into little pieces, since it will not be beneficial to your prospects of being approved for a mortgage in today’s market.

Remember, mortgage lenders are driven by the depth and length of your credit history, not only your payment history. Overall, mortgage brokers and financial institutions home in on your total credit usage as a portion of available credit.

Final Thoughts

Let’s be honest: It can be harder to get approved for a mortgage. Average home prices are high across the country, the stress test has been raised, and interest rates are rising. Homeownership can appear to be a daunting task, but it is still within reach if you do your due diligence.

If you have the means to apply for a mortgage, you can enhance your chances by being extra cautious as you wait for that life-changing stamp of approval.


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