Education Centre

  • Buying a Property

    • Property Tax

    Property Taxes

    Every year, municipalities across each province in the country assess and determine their individual property tax rates. Often falling in the 0.5-2.5% range, this tax is then multiplied by the market value of the property and the amount is due once per year. Because the tax rate is different from municipality-to-municipality, and they can change annually, it’s difficult to compile a list of every rate. It’s important to remember that property tax is not due at closing but is, instead, added to your monthly carrying costs along with your mortgage.

    How are my property taxes calculated?

    Many of the other taxes and fees involved in buying a home involve the purchase price of the home, however, property taxes are calculated using the market value of the property and the intended use (residential versus commercial). Your province’s assessment board determines the market value of your property and, once a year, it is multiplied by your municipality’s tax rate; the result is how much you owe in property taxes.

    For example, if the market value of your home is $360,000 and your municipality’s tax rate is 1%, you would pay $360,000 x 0.01 = $3,600.

    How can I pay my property taxes?

    Most lenders will take your annual fee, divide it by how many mortgage payments you make each year, and add the number to each of your payments. For example: if your property taxes due are $3,600 and your monthly mortgage payment is $1,400, your lender could divide the property taxes by 12 months and add it to your monthly payment. $3,600 ÷ 12 = $300 + $1,400 = $1,700. In this example, your monthly mortgage payment including your property taxes would be $1,700. The lender would then take the amount allocated for your property taxes and pay the municipality, usually once per year.

    Most municipalities offer a number of other payment options, including: paying by mail or in-person, paying by online or telephone banking, or setting up a pre-authorized pre-payment plan.

    Why do I have to pay property taxes?

    The property taxes due by each municipality’s residents and commercial building owners help to pay for services, such as: garbage and recycling collection, sewer protection, road and draining maintenance, street lighting, policing, fire protection, snow removal and more.

    What if the seller has prepaid their property taxes?

    When you buy a home, your real estate lawyer or notary will confirm whether or not the seller’s property taxes have been paid and are up to date. If they are not, the local municipality will require the seller to pay them. However, if they are, you will have to pay the seller back for anything they have paid from the closing date to the date they have paid up until.

    For example, if the purchase of your home closes on February 15 and the seller has paid their property taxes until March 31, you will have to pay them the amount that would have been payable between those dates. This amount is calculated by your lawyer or notary and must be paid by you at closing.

    Looking at the numbers we used before, you would have to pay the seller back $433 for the property taxes they prepaid:

    (
    $3,600
    Property Taxes for the Year
    )
    ÷
    (
    365
    Days Per Year
    )
    =
    (
    $9.86
    Per Day
    )
    ×
    (
    44
    Days
    )
    =
    $433.97
    Due to the Seller