What to Do If You’re Behind on Property Tax
Owning a home comes with a number of costs that you might not have considered ahead of time. One of the most common items that people often forget about is property tax.
However, making sure you’re paying property tax is vital because you can lose your home if you fall too far behind. In fact, even if you’ve paid off your mortgage, it’s still possible to have your home taken from you if you’re behind on property tax.
Many financial institutions collect tax with your mortgage payment, thereby eliminating the chance to have property tax arrears, some lenders don’t. In fact, many lenders don’t have a tax account set up for homeowners, as this usually comes as an expense to the lender. For this reason, it’s prudent for homeowners to set up automatic withdrawals with their municipality to avoid having outstanding taxes.
So, what can you do if you fall behind? Here’s what you need to know about settling up with the government, so you don’t lose your house in a municipal tax sale.
Check into Tax Abatements
One of the first things you can do if you’re behind on property tax is to see if you’re eligible for any property tax abatements. These can be available at the federal, provincial, or local level. However, they’re not always easy to qualify for.
You might have to check into your options, and you could discover that you’re not eligible for an abatement or a deferral, which gives you more time to make your tax payments. In fact, extension agreements are given sparingly because the local government requires this revenue to operate. In other words, the tax property owners pay, keep municipal services like road garbage removal and snow plowing moving.
If you can’t find this type of solution to your problem, it becomes important to come with a way to pay your taxes before the end of the redemption period. Once you get to the end of the redemption period, your home could be sold out from under you as a way to cover your property taxes.
While you can apply for loans to help you pay your taxes, or even use a credit card, the reality is that it can be difficult to get approved for unsecured debts — especially if you have less than perfect credit. When that happens, you need a more practical solution.
What Happens if I Can’t Pay My Property Taxes?
Namely, you could lose your house in a tax sale. To illustrate, if you have significant outstanding taxes, your local government will apply penalty and interest to any monies owing. Afterwards, they will register a tax lien, also referred to as a tax arrears certificate. Thus prohibiting the sale of your home until all unpaid property taxes are caught up. At this point, if you are unable to agree on payment plans, they will escalate the matter.
Above all, your municipal government will do everything within its power to recoup property tax arrears, even if they have to sell your house. Consequently, they will enforce their tax arrears certificate, allowing them to begin the process of a municipal tax sale.
Indeed, selling your home seems like a drastic measure. However, municipalities rely on tax revenue and when push comes to shove they will do what they need to. For this reason, it is important for homeowners to find a solution quickly so they don’t lose their home. One of the easiest ways to pay your property tax arrears is by leveraging the equity you have built up in your home.
Using Your Home Equity When You’re Behind on Property Tax
Rather than relying on other ways to solve the problem when you’re behind on property tax, you might consider a home equity loan. A home equity loan takes the value you have in your home as security. That way, you might be able to get help paying off your property tax debt even if you have poor credit.
A company like TurnedAway.ca offers you the chance to connect with a variety of lenders who focus on the amount of equity in your home to make decisions about loans. That way, you are more likely to get the money you need to pay off your property taxes.
Figuring Out How Much Equity You Have in Your Home
When you want to use your home equity when you’re behind on property tax, you need to first figure out how much equity is available. To do this, you take a look at how much your home is worth in terms of market value. Then, you subtract the amount you still owe on your mortgage.
So, let’s say your home is worth $275,000. Your mortgage balance is $150,000. So, the difference between your home’s value and your balance is your equity. In this case, it’s $125,000. If you could access that equity, you could borrow enough to pay off your property tax bill — along with any fee and penalties that have been added.
Types of Home Equity Loan
There are two types of home equity loan you can use when you’re behind on property tax:
- Second mortgage: This type of home equity loan offers you a lump sum. This type of loan is less dependent on your credit, so it might be easier to get. However, it is less flexible. You’ll make regular loan payments until it’s paid off, and if you need access to more capital, you’ll have to re-apply.
- Home equity line of credit: Rather than being a lump sum installment loan, a line of credit is revolving and operates similarly to a credit card. You have a credit line, and you free up more availability as you make payments. If you need additional funds later, after you’ve paid off your property taxes, you can access the line of credit without re-applying. However, your credit score matters more with a HELOC, so if you have poor credit you might have a harder time qualifying.
Which type you choose depends on your lender and your situation. Consider your options if you’re behind on your property tax.
Where Can I Get a Property Tax Loan?
In truth, there are few lenders who tolerate property tax arrears. That being said, it is important to work with a mortgage broker who specializes in property tax arrears. A knowledgeable broker will be able to help you use your home equity to arrange a property tax loan.
Turnedaway.ca specializes in this type of financing and we arrange challenging mortgages all the time. If you have accumulated equity, we will find you a solution. Because we routinely deal with these situations, we can quickly arrange financing and stop the threat of a tax sale. Additionally, we can do it with the best rates and most flexible terms because we have well-established relationships with our lenders.
To sum up, if you have property tax arrears, outstanding taxes or can’t pay your property taxes, we can help. Call us today for a free consultation at 1-855-668-3074 or apply online and we will begin working on your approval immediately. We can provide same day approvals and understand how to deal with municipalities.