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.”