Monday, February 2, 2015

Property Tax - Is having the bank pay them the best method?

It is an interesting time of year when your year end mortgage statements arrive.  I started with my primary residences mortgage statement for my Ottawa home.  It shows the amount of principle, interest and taxes you paid during the previous calender year.  Often, these are put in a box and sent to the accountant in April. 

I spent some time reviewing my statements recently and was shocked at the results.  On a few of my properties, I had over two years worth of property taxes in the tax account.  Usually, you have about one year in advance, because taxes are due March and June in most municipalities.  This can easily add up to thousands of dollars of withholding by the Bank on our behalf.

I started doing some research and discovered that most municipalities offer a monthly auto payment from your bank account.  For instance, if you own Ottawa real estate, they will accept monthly payments for your taxes.  Currently, most people pay their monthly mortgage payments as Principle, Interest and TAXES.  By paying the municipality directly, you might actually save a bit of money monthly, as the withholding is usually about 5% higher than the taxes due. 

What do I do?
Step 1 - You can ask the bank to change to merely Principle and Interest. 
Step 2 - Then you can ask the municipality to do a monthly withdrawal of your property taxes.

Each month, instead of having one payment to the bank, you will have two payments, one to the bank (covering principle and interest) and one to the municipality (covering taxes). 

The real upside to this, the bank will close your tax withholding account and credit your bank account all the taxes withheld on your behalf.  This can easily amount to $1000s of dollars per property you own.

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