Once you buy your home, you will have to pay a property tax.
A property tax is paid by the owner of the property, and is calculated using the municipal/city assessed value of your home and the municipal tax rate. Therefore, you and your neighbors might have a similar property tax bill (if your homes are similar too) but you and your friend who lives on the other side of town, probably do not.
Property taxes are extremely important for the government – in fact, they are the main source of revenue for them. Property taxes might seem like another annoying fee the government charges, but there is no way of avoiding them if you own property.
Property taxes are split between your municipal (city) and provincial government. They are used for a variety of public services: everything from public schools to sewage systems to the local police. They help pay for the services that people use in their everyday lives, such as public parks and libraries. They also help fund fire departments and other essential workers. Although most property taxes go to the services listed above, your area of residence and municipality may be using your property taxes for specific projects, such as the renovation of a new water treatment facility or even the construction of a new school. For this reason (as well as the associated costs with living in certain parts of Canada), property taxes will vary from area to area.
To go into further detail on how property taxes are calculated, you need to know two things: the tax assessed value of your property and the property tax rate of your municipality. The municipality will send out annual property tax assessments based on what they think your home is worth. As a property tax owner, you have the right to challenge the assessment if you feel it has been assessed too high, therefore causing your taxes to be high as well. Our How to Buy a Home associates can help you estimate what the property tax on your potential home might be – and, as always, if you have any questions, we are here to help.
Typically, there is a lag time between tax assessed values and the actual market value of your property. This is because your municipality uses the previous year in its calculations when trying to determine the value of your home. Therefore, if home values have risen 10% in the last year, this will be captured in next years tax assessment.
There are a few different ways to pay your property taxes.
You can:
Pay them in full with your municipality
Set up a monthly payment plan with your municipality
Have your mortgage lender add them to your monthly mortgage payment
It’s very important to calculate the cost of property taxes in your budget when looking to purchase a home. It’s also important to realize that the amount of property tax you pay from year to year can fluctuate. When the value of your home increases, so do your property taxes!
