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Should You Roll Your Property Taxes Into Your Mortgage Payments or Pay Them Directly?

Should You Roll Your Property Taxes Into Your Mortgage Payments or Pay Them Directly?

When finalizing the mortgage for your new home one of the questions you will have to answer is whether you would like to pay your property taxes through your municipality or if you would like to roll those tax payments into your regular mortgage payments. For some, one option makes more sense than the other but the answer is completely up to you. If you are a first-time homeowner, you may find it very convenient to pay your property taxes through your mortgage payment giving you one regular payment to worry about rather than two – but here are a few other points to ponder before making your decision.

Exterior of large two-storey home with cedar siding in nice neighbourhood

If you do roll your property tax payments into your mortgage payments…

  • You don’t have to set aside a large chunk of cash to pay your property taxes on the municipalities payment schedule which can give you more monthly cash flow.
  • You only have one payment schedule to worry about and will not have the stress of trying to remember if the payment is to be made monthly, quarterly, annually as well as making sure that it is paid in a timely manner.
  • You won’t incur any late fees because your lender or the bank is responsible for making the payments for you and making them on time.
  • Your lender estimates the amount of property tax that you will owe annually and then divides that amount by the number of mortgage payments you make in the course of the year. As the bank/lender tends to over-estimate a little in case the amount owing fluctuates throughout the year, they could collect more than they actually need to. The bank/lender refunds any excess it collects but it typically is returned over a long period of time, which means that you could have a little less cash flow than you might have originally had.

If you don’t pay your property taxes through your mortgage payments…

  • You will need to keep track of how much each payment is supposed to be and when the payment is due by so that you make those payments on time.
  • If you miss the deadline for making a payment you could incur penalty fees and end up paying more than you originally had to.
  • You could put aside the money for your property taxes a little each week in a savings account and benefit from the interest you’ll earn on your account through your bank.
  • Depending on the payment schedule of your municipality you will need to plan to have the amount owing set aside to make payment before the actual payment due date, which can be tough to remember to do.
  • Many municipalities now have Tax Installment Payment Plans (TIPP) which automatically bills your bank account on a monthly basis to help simplify the process

Whichever option you decide upon will be a personal choice that suits your own needs and lifestyle, though typically most homeowners will pay their property taxes through their mortgage as the pros tend to outweigh the cons. Don’t forget though, if you have any questions or would like to make any changes within your current mortgage I’m always happy to take the time to review your options with you in detail. I’m here to help you find the best mortgage and terms to suit your needs on your schedule, just give me a call at 705-315-0516 and we’ll talk.

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