Everybody knows that when you buy a house and become a homeowner you have to pay property taxes. What most people do not realize is how seriously the mortgage lenders take your taxes. They want to be sure that your taxes are paid and kept up to date in case they have to take your house back in a power of sale situation. You don’t pay the mortgage- the bank takes your house. Pretty simple concept. But in a power of sale, the property taxes take precedence over the mortgage. Meaning the taxes get paid before any outstanding mortgages, so the bank wants to make sure you pay your taxes.
They will try to suggest to have your property taxes added to the mortgage payment and let them take care of paying your taxes. Don’t do this- it is a mistake. When you pay your taxes to the bank they will want you to maintain a balance in your “tax account” generally a quarter to a half year of taxes. So if your taxes are are $3600 per year the bank will want to keep about $1000-$1500 of YOUR money to cover themselves.
If you are a first time buyer they may pressure you to get you to have them pay the taxes. They will make it sound like they are doing you a favour and it will be easier for you. Anything a bank does is for the bank’s benefit, not yours. Push back and tell them you will pay directly to the city with a pre-authorized payment plan. I know that when you are buying a house there are so many things going on that would be easy to just let them handle it, but the best way is to sign up for an automatic payment plan with whatever city you are buying in. It is not a hard thing to do, usually just filling out a form.
The City of Barrie has them. As do Innisfil, Springwater and most other surrounding towns. What they normally do is divide your tax bill by ten and take out ten monthly payments. Generally January to October.
I have never had a bank collect my taxes. I used to go in and pay them quarterly before I signed up for a PAP. They are a great thing.