Have you found yourself in the uncomfortable
position of having a property tax lien placed on your home because you have
been unable to pay your property tax? Are you asking yourself what to do if you
have a property tax lien on your home? This can be an inconvenient occurrence,
but it is not the end of the world.
Property tax in Canada is a mandatory
requirement, and there are consequences to be faced if you default on your
taxes. One of these consequences is a property lien on your home.
So what is a lien? A lien is a claim on an
item of your property (in this case, your house) that assures the settlement of
a debt. What is a property tax lien? A property tax lien is a claim on your
home that ensures payment of the debts owed to the Canada Revenue Agency (CRA)
for unpaid property taxes.
What does this mean? It usually means
that the balance owed becomes a forced payment that comes before any other –
even your mortgage. This can be detrimental as it can impact your ability to
pay other bills, thus damaging your credit score. Additionally, a property
usually cannot be sold, and banks typically refuse to refinance a property, if
there is a lien on it, therefore impacting your ability to sell your home or
refinance your mortgage.
So what do you do if you have a property
tax lien on your home? The best way to solve the problem of having a property
tax lien on your home is to pay off the outstanding debt. This may seem difficult,
but there are options.
The best option is to refinance your
first mortgage or take out a second mortgage through your local mortgage
broker. This will allow you to use the equity in your home to pay off the
property tax lien, in turn saving you the interest you would have been forced
to pay had you just continued to pay the monthly lien payments. A longer
amortization period often means that your monthly payment increase is minimal
and therefore your ability to pay is increased.
Sometimes your mortgage broker will
voluntarily pay the off the lien, meaning you are then required to pay them
back. This may seem like a great option, however, this could result in your
house being put up for power of sale if you default on your payments to the
mortgage broker. This option is probably best avoided.
Another seemingly viable option is to
apply for a credit line or loan to eliminate the debt and get rid of the
property lien. Again, this may just cause more problems as it is just another
monthly payment for you to struggle with.
Want to avoid going into arrears on your
property taxes in the future? A good way to do this is to get your mortgage
broker to roll your property taxes in with your mortgage. Having one monthly
payment may be much more manageable, and your property taxes will not default –
thereby avoiding a property tax lien.
For more information about property tax
liens and what to do if you have a property tax lien on your home, please
contact Paul Mangion at The Mortgage Centre by calling 416 204 1256 or visit www.themortgagecentretoronto.com
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