Not paying taxes bad advice, brokers agree

by |
An article in the Financial Post suggesting people should stop paying property tax to save money is not just bad advice, but a recipe for disaster, says one broker.
“This is almost as bad as the ‘borrow for your RRSP contribution’ advice that comes up every year around tax time,” says Paolo di Petta, a broker with EQRON Mortgage Corporation. “It's the sort of thing that works in principle, and only in specific cases, but most people don't have the personal restraint to do it properly in actual practice.”
The article, “Short on cash? Stop paying your property taxes,” suggests that seniors are increasingly able to defer property tax payments or increases, allowing them to hold onto much needed cash in uncertain times. That movement may be gaining traction in British Columbia for people over the age of 55 and Albertans over 65.
Still, there may be consequences for homeowners looking to draw equity out of their homes if those government-approved arrears mount.
“Lenders don't look too kindly on tax arrears, even if there's some roundabout incentive or deferral program,” says di Petta. “The government always gets paid first; a lender doesn't want the LTV to creep up, nor do they tend to look kindly on people who avoid taxes.”
Ontario offers a variation on this, allowing seniors 65 and older to put off paying any increases on their property taxes.
Although allowing seniors to save $200 - $300 a month by deferring their tax payments, it does leave less equity in the home, and less inheritance for the next generation.
Drew Donaldson, vice president of Safebridge Financial, agrees that offering advice to clients to defer paying taxes can only hurt clients in the future.
“We would never recommend any of our clients defer paying taxes as they pay interest on the amount they are behind,” says Donaldson. “This is not a sound financial plan and could hurt them in future years.”
  • Christopher on 2013-05-30 10:27:33 AM

    It's also considered defaulting on your mortgage it there is one.

  • Gail on 2013-06-03 7:36:57 AM

    I think this is bad advice if its generalized in the post. However, there are circumstances where it would make sense, if the house has been paid off especially. In some areas property taxes have gone through the roof. Should a senior be forced to move because they can't afford it ? Should they sell the only home they ever had and still love so they can give money to the next generation? Should they pull equity out of the home and add a mortgage bill (+ property tax pmt) Depending on the repayment terms that are offered tax deferment shouldn't be discounted as a viable option for some.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions