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