Posted by: Daryl & Wendy Ashby | July 29, 2011

Tax Deferrals

With levels of affordability eroding in some regions in the country, there are options available to some homeowners to both increase their cash flow and to work at building equity in their properties.

Many areas allow for homeowners to utilize either a partial or full property tax deferral system.

For instance, in Ottawa, a senior with an income below $37,325, or an individual receiving disability payments, as long as their property taxes are up to date, they may apply for a deferral. The interest rate for this deferral is 5%.

Payment is required any of the following conditions: sale of the property, the applicant becoming ineligible or upon the death of the applicant, unless the applicant is survived by a spouse who also qualifies for a deferral.

Similarly, in Halifax, there are programs that “can help homeowners pay their property tax through a payment plan, a property tax rebate, or deferral of property taxes (payment is put off to a later date). These programs are available to all homeowners with a combined annual household income of $30,000 or less, who live within the boundary of Halifax Regional Municipality.” This tax deferral is then set up as a lien against the property.

British Colombia offers a province-wide assistance program which is touted as a “a low-interest loan program that assists qualifying homeowners in British Columbia in paying the annual property taxes on their principal residences.”

For B.C. homeowners, there are a few rules too. There must be 25% equity in the property in question- unless the applicant seeks to qualify under the “Family with Children” option; it must be the principal residence; deferral for this program can be for as long “as you own and live in your home, maintain the minimum equity requirements and continue to qualify for the program.”

In B.C. – Victoria in particular, this may prove to be a reasonable option, as property prices continue to skyrocket.

But what about for other parts of Canada?  Halifax Realtor Larry Matthews, Hants Realty believes that in his market, this represents a good option for some members of the homeowner public.

“I would suggest the tax deferral program could be very helpful to seniors on a fixed income (comparable to a reverse mortgage) Not having to pay the property taxes may enable them to stay in their own home longer. It is a liability that would build over time having to be paid upon transfer of title.”

“Most mortgages are set up so borrowers pay the taxes monthly with the tax bill sent to the lender for payment from the borrowers tax account. So it would not help those home owners struggling with debt or high mortgages. The tax deferral amount can not exceed 75% of the assessed value. For homeowners that qualify it may help them maintain their quality of life in their own home for a longer period of time.”

Matthews feels too, that other groups might benefit from this as well. “I might suggest offering something the same to the small business community for commercial buildings. These are the people who create the jobs and having the option of tax deferral might enable them to keep a few more employees working.”

Matt Daniels, Principal Broker / Owner, Ottawa Mortgage Advisors.com defers to the fact that this is less strategy, and more lifeline. “I would not say this is a strategy at all, but rather a last resort for the few people that would qualify. Don’t get me wrong- it is a great program, that some cities offer that does truly help the seniors, disabled citizens, and low income households. However, the property tax does not disappear. They still have to pay it back with interest and fees.”

Daniels suggests that homeowners would be far better to consider other alternatives that may be able to better help for the long term: “They should look at consolidating their debts which depending on the situation could free up hundreds of dollars in monthly savings.”

All, areas like Halifax and Ottawa do continue, for the most part to be affordable. Says Daniels:  “Compared with a lot of the other major Canadian cities (Vancouver/Toronto) Ottawa is still an affordable place to live. The average home price in Ottawa is now $351,266 and climbing so it is getting harder for first time home buyers as fewer homes hit the market. One positive note is that recent stats show overall income gains, which provided some extra budget room.”

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