Property Tax Question on new home

[adammo]

Hi all,

I just wanted to ask about property taxes on a new home. I'm not sure if this depends on the province but here is what we have:

- Closing: Sept. 15th
- Part of Closing costs include paying the builder back for 2009 taxes paid for the entire year
- We pay the property taxes at the same time as our mortgage because we have CMHC fees for less than 20% downpayment.

I am just a bit confused about 2010 property taxes. I believe they are due to be paid by May 2010 and the bills do not arrive until Feb/March 2010. Since we are using CMHC (less than 20% downpayment) each mortgage payment includes the mortgage and property taxes. So I am thinking that from Nov1 to May 1 that each mortgage payment is going to be inflated quite a bit extra due to the property tax for 2010 being due in May. Am I correct in this assumption?

I'm just curious what others have done becuase i'm sure i'm not the only one. It seems like if you bought a house in December that you would have to be prepared to have a very large mortgage for the first few months. I'm just wondering if I am missing something here?

I realize that this is more of a question for my lawyer/agent/banker, but I can't seem to get a hold of anyone right now. Sorry to bother!

[Beachdown]

The property taxes owed to your builder will be a much smaller amount than what you will owe next year as a homeowner. Right now, the house is assessed differently and at a much lower rate than it will be when it's completed.

Your bank will calculate your total estimated property taxes for 2010 and divide by the amount of payments you make. You can have a deficit in your property tax account (or vice-versa) and the bank will adjust your payments accordingly at the end of the first year.

[CSK'sMom]

I'll just add that you should expect slightly inflated tax portion payments for the first year to 18 months of the mortgage. This is to build a buffer in the tax account so that it's not in a deficit for months when payments are made. I'll also say that when banks pay your taxes for you they have deals with all the cities/towns that they do 3 or 4 payments throughout the year vs. one lump sum.

[gman]

I also want to add that you may not be charged the right amount for 2010 property tax because the property type may not be adjusted in time.

For example, you may see you are charged $1000 (because the property type was still a 'farm') in 2010. In 2011, they change the type to resident and the property tax becomes $2000. They will ask you for the extra $1000 for 2010 in 2011.

Make sure you keep some money aside if the bank does not handle that fully.

[Beachdown]

I'll just add that you should expect slightly inflated tax portion payments for the first year to 18 months of the mortgage. This is to build a buffer in the tax account so that it's not in a deficit for months when payments are made. I'll also say that when banks pay your taxes for you they have deals with all the cities/towns that they do 3 or 4 payments throughout the year vs. one lump sum.

^ This is what TD did on my mortgage a few years back. Had a fairly significant surplus when all was said and done.

I bought a new house last year and I'm with RBC now. They don't bundle property taxes in. So I imagine this is just at the whim of different banks?

[YYC27]

I think it just depends on how the mortgage was set up. My mom's with TD, and her property taxes aren't bundled into the mortgage payment.

The lender I'm using made it a condition of approval that I either bundle taxes with them or enroll in the city's TIPP program.