Real Estate

Pay Property Tax through Lender?

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  • May 5th, 2020 9:44 pm
[OP]
Member
Sep 11, 2017
469 posts
298 upvotes

Pay Property Tax through Lender?

Hello All,

I am closing on an investment property shortly in the GTA. The lender is stipulating that I have to pay the City of Toronto property tax within the monthly mortgage payment to the lender. I had requested that the lender change this requirement as I wanted to pay directly to the City but they are pushing back. Is this normal?
7 replies
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Oct 13, 2014
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I know that was the way it was done many years ago and unless I am mistaken they still require it to be done this way if the down payment is minimal. Keep in mind the banks want to secure the property in the event of non-payment, etc. If one falls behind on their taxes it is the municipality that comes first should there be a foreclosure, but if the bank ensures the taxes are paid then they can recover.
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Jan 2, 2012
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FedExpress wrote: Hello All,

I am closing on an investment property shortly in the GTA. The lender is stipulating that I have to pay the City of Toronto property tax within the monthly mortgage payment to the lender. I had requested that the lender change this requirement as I wanted to pay directly to the City but they are pushing back. Is this normal?
It's entirely up to your lender. If you don't pay your taxes the city can put a lien on your home, and would be paid out first before the mortgage lender in case of a bankruptcy. So I can see lenders making it a mandatory requirement to include taxes with mortgage payment, especially for those with low equity in the home.

That being said, later on in your mortgage they may allow you to move to paying the property tax by yourself. I've been with several different lenders and all have allowed to pay taxes on my own, though when I got my very first mortgage long ago I remember the lender was paying taxes (though at the time I didn't care so don't know if it was mandatory or not).
[OP]
Member
Sep 11, 2017
469 posts
298 upvotes
rob444 wrote: It's entirely up to your lender. If you don't pay your taxes the city can put a lien on your home, and would be paid out first before the mortgage lender in case of a bankruptcy. So I can see lenders making it a mandatory requirement to include taxes with mortgage payment, especially for those with low equity in the home.

That being said, later on in your mortgage they may allow you to move to paying the property tax by yourself. I've been with several different lenders and all have allowed to pay taxes on my own, though when I got my very first mortgage long ago I remember the lender was paying taxes (though at the time I didn't care so don't know if it was mandatory or not).
I'm putting up 20% DP. If I was putting 5% down that would make sense to me. The lender holds all the cards I suppose
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Apr 25, 2010
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Toronto, ON
Seems strange. We were given the option with First National and said no without any persuading. We put down more than 20% down payment, but not more than 25%.
Member
Oct 14, 2010
456 posts
454 upvotes
Toronto
FedExpress wrote: I'm putting up 20% DP. If I was putting 5% down that would make sense to me. The lender holds all the cards I suppose
Yeah, all cards with the lender. Some are ok with you paying to the city or they paying to the city, others insist on only them paying. And the ones who insist on them paying will not budge on it.

We have had both set ups in the past, and in hindsight actually prefer them paying now.

Even now we have one property where we pay directly to the city, and another where it is through the mortgage. I always have trouble remembering to pay the first installment on time each year :-).
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Feb 10, 2018
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I know you said investment property, but is your downpayment less than 20%?
Member
Oct 14, 2010
456 posts
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Toronto
EDL67134234 wrote: I know you said investment property, but is your downpayment less than 20%?
The investment property was 20% down, and the two lenders we were considering had different policies, one wanted taxes trhough them, the other asked what do you want.

For our home also we saw that same thing with lenders some were what do you want, others pay through us. The down payment was 5% (technically less than that after CMHC) but 2 of 3 of our mortgages have been taxes through us, the current one was no ways on paying your own taxes.

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