Deferred property taxes - a good thing? | General financial discussion | Discussion forum

Watch for what condition you are allowed to apply, how interest rates are managed and how they apply differently based on type of application, can you drop in our out of the program, or do you have to wait for sale of home. You should also look at the stability of your income and employment now and into the future as well. Lots of questions to ask your self to be answered before you lead into this one for sure.

I know some advisors here are suggesting to use this feature to invest but ..... I would not trust an adviser and in this case I personally would only do GIC's and better yet in a TFSA if you had room for it.

I guess if you cannot afford to pay property taxes it is a good idea but if all is fairly well for you, financially, then look at your age and how it would impact on you 20 years away or at retirement etc.

For me, right now, it would be a "NO GO" as I am retired and trying to max out all my eligible tax deductions, keep in the lowest tax bracket and remove as much RRIF money without negative affect to the latter and move those funds to a TFSA. So if I had say $4000 a year every year I think the taxable interest "income" would affect my plan. And also think of this....if you want to downsize (and buy a smaller accommodation) and your crystal ball is fuzzy and you sell in a falling market....I assume the lawyer or notary handling the sale of your home would pay off the government from the proceeds of the sale or you have to pay off before you sell.....leaving you with a locked in GIC which is not all that bad...or having to sell some stocks at a loss which is bad. Lots to think about and questions to be answered!!

Here is some information from my cities website and the Province of BC

From the Maple Ridge BC website.

Property Tax Deferment

The Province offers property tax deferment programs to assist eligible home owners during years when they may be struggling with paying their property taxes. Tax deferment is a loan program that allows eligible home owners to defer all, or part, of the annual property taxes on their home. Before you apply for the Deferment Program, you must claim your Home Owner Grant (if eligible), pay your previous years taxes, utility user fees (sewer, water and blue box), penalties and interest. The City of Maple Ridge can only forward your application to the Property Tax Deferment Office once you've met these requirements.

Families with children application

Regular application.

Info from Province of BC site.

Quick info from BC website.

Defer Your Taxes

Once you receive your property tax notice, you may be able to apply for a low interest loan to pay your current year property taxes on your principal residence. There are two programs you may qualify for:

Regular Program
You may qualify for this program if you’re:
55 or older during the current year or
a surviving spouse of any age or
a person with disabilities
Families with Children Program
You may qualify for this program if you're a parent, stepparent or financially supporting a child.
You can apply to defer a portion or all of your residential (class 1) or residential and farm (class 1 and 9) property taxes after the home owner grant is deducted. If you qualify for the home owner grant, you must apply for it separately every year.

If your application is approved, the province pays your current year unpaid property taxes on your behalf.

Sometimes it can take us several months to process tax deferment applications due to the need to gather necessary information. You may not get a response from us about your application until after the property tax due date. If your application is received before the property tax due date but is approved after the due date, you won’t be charged a late payment penalty.

You'll be charged a late payment penalty if:

you apply after the property tax due date
your application isn't approved and it’s past the property tax due date
you fail to provide the required information
you sell your home before the taxes are paid on your behalf
you cancel or withdraw your application for any reason at any time before the taxes are paid on your behalf
You can make a payment or repay the loan at any time without penalty.

Property Lien

While you carry a property tax deferment balance, you'll have a restrictive lien registered against your property. Once the lien is registered, you can only change your property title to add your spouse. You must repay the outstanding balance of your agreement before you:

sell your property
change property owners other than adding your spouse
refinance with some financial institutions (check with your financial institution )
Other title changes may require repayment. Contact us for information.

Interest

Interest is calculated every month starting from the date your property taxes are due or the date you applied to defer, whichever is later. You'll be charged simple interest on the taxes you've deferred. You won’t be charged interest on interest or any application or renewal fees.

Interest rates are set every six months. The interest rates until September 30, 2016 are:

Regular Program: 0.70%
Families With Children Program: 2.70%

rhvic said
Has any one else an opinion on doing this? Are there any negatives, such as an effect on credit rating? It does result in a lien on the property, but that can be dealt with any time before or upon sale of the property.

I would be concerned about increases to the current 0.7% interest rate charged. But, if the deferred taxes will just be in a high interest savings account, then I guess one could withdraw it and pay the taxes off should the rate go up substantially.

How would the mortgage lender feel about this tax lien appearing on the property? Any requirements in the mortgage loan agreement to keep current with property taxes?

I agree completely with Brian.
These kinds of schemes are usually meant for, and best suited to, people with low cash flow for whom eliminating this expense from the current year's budget would make it feasible for them to continue to live in their home.

rhvic said
…
But upon further investigation, I do find a few things to consider. My property taxes are about $2000 per year. There is a $60 application fee and an annual $10 renewal re deferred taxes. The $60 is thus 3% of the owed amount, and the renewal fee is another 0.5% initially. So on reflection, I do not see the advantage of deferring taxes in my case, just to put the money instead in an account which might pay 1-1.5% above the 0.7% the government will charge me.

Maybe if somebody in a jurisdiction with very high taxes (and an expensive property) were to defer, it would make sense.

May not make sense in Year 1 for $2,000. But, by Year 10, one would have deferred $20,000 and the $10 annual renewal fee becomes 0.05% of the total amount deferred.

It really depends on what one's long term plans are for the deferred tax money. I'm not that sure EQ Bank will keep its savings account rate 1.5% above what the BC government will charge (up to prime minus 2%) on the deferred taxes over the next ten years. I think the odds would be better with stocks.

Norman1 said
I would be concerned about increases to the current 0.7% interest rate charged. But, if the deferred taxes will just be in a high interest savings account, then I guess one could withdraw it and pay the taxes off should the rate go up substantially.

How would the mortgage lender feel about this tax lien appearing on the property? Any requirements in the mortgage loan agreement to keep current with property taxes?

The interest rates is set @ 2% below prime, so even if (when) interest rates do up, one would assume that the rate on your HISA would also follow suit. Where else can you get a loan for 2% UNDER prime? My taxes are 2650 so I would actually lose money the first year when you take into account the 60.00 fee. With the 10.00 renewal fee each year, I would start making money. I guess it would depend on how long you plan to keep the property.

Does anybody know if the 10.00 renewal fee is for deferring all future property taxes as long as you are in the program or is there a 60.00 fee every year you request another deferral plus ten for each year you continue deferring? Not clear on that.

Rick said

Does anybody know if the 10.00 renewal fee is for deferring all future property taxes as long as you are in the program or is there a 60.00 fee every year you request another deferral plus ten for each year you continue deferring? Not clear on that.

This is from the FIN 51 Guide:

FEES AND INTEREST

An administration fee of $60 is added to new approved tax deferment agreements. A $10 annual renewal fee is added to accounts with approved renewal applications. Interest is not charged on fees. You are not required to pay these fees at the time of the application.

Simple interest is charged on your tax deferment account at a rate not greater than 2% below the bank prime rate and is set every six months in April and October. ….

Norman1 said
This is from the FIN 51 Guide:

FEES AND INTEREST

An administration fee of $60 is added to new approved tax deferment agreements. A $10 annual renewal fee is added to accounts with approved renewal applications. Interest is not charged on fees. You are not required to pay these fees at the time of the application.

Simple interest is charged on your tax deferment account at a rate not greater than 2% below the bank prime rate and is set every six months in April and October. ….

Rick said
Thanx Norman...I did read that and maybe I'm over thinking it. You pay 60 to defer your 2016 taxes. So in 2017, if you choose to defer your 2017 taxes, you just pay 10 to continue deferring your 2016 AND 2017 taxes?

That's what it sounds like. You're right: It's not perfectly clear.

I would contact the BC government to confirm if you are thinking of participating. There is a contact phone number and e-mail address at the bottom of the right side bar on this page, under Useful Contacts:

http://www2.gov.bc.ca/gov/cont.....ar-program

Threw together a quick SS - quite profitable after a few years:

Assumptions: 3000 taxes; 1.2% deferred rate; 3.5% GIC rate, 1% inflation on taxes
ignored fees, they are negligible