Personal Finance

Property Taxes...Lump Sum or Monthly?

  • Last Updated:
  • Feb 1st, 2023 12:03 pm
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[OP]
Deal Addict
Jul 21, 2005
2053 posts
1104 upvotes
Alberta

Property Taxes...Lump Sum or Monthly?

Hi All,

So I own a property in Calgary and have up to this point been paying property tax as a yearly lump sum. I am now building a second home as an owner/builder on an acreage that we bought a few years back, which means that my property taxes are now, for the duration of construction (another year at least) will be are like 3x what it used to be as the new house is about 2x the price of the existing one.

I am using the equity in my paid off first home to finance the construction of the new one. Since it's a HELOC and the government keeps jacking interest rates, I think the interest rate on there is now at like 7%... .

The way I manage my finances now is that I put everything I can on the credit card for simplicity, and then do a HELOC > Chequeing account transfer 3 days before credit card bill is due, and a scheduled payment a day later. The moment I get paid I send most of the money towards paying off the HELOC principal, with the only hold back being to cover the monthly interest which automatically gets withdrawn from my chequing account. This works well as I maximize the interest free period with credit cards and don't have to have a bunch of money sitting in chequing account for other direct withdrawals that I could use to pay off the HELOC principal instead.

Our city and the new county where I am building have a TIPP program, which basically, interest free, allows you to pay monthly simply by taking the amount and dividing it by 12. I have been thinking of applying for this for both properties, but then I was thinking if it's actually worth it. At first glance it looks like a no brainer...interest free for 12 months vs paying interest at 7%....but I don't think it's that simple.

If I pay in lump sum for both properties, I can pay off the lump sum for this in a month...vs. paying monthly and holding back more funds in my account every months for TIPP x2, thus reducing my principal repayment monthly so that I have enough funds to cover Interest + 2x TIPP payments. I can't seem to wrap my head around what's more beneficial over the course of the year. I think logic says that TIPP would be more beneficial regardless...but just wanted some confirmation from people smarter than me.
4 replies
Sr. Member
Jul 8, 2009
797 posts
355 upvotes
Toronto
eblend wrote: thus reducing my principal repayment monthly so that I have enough funds to cover Interest + 2x TIPP payments.
Yes, you'd have to reduce the payment you make into your HELOC, but you're forgetting that the total balance of the HELOC would be lower during this period because you didn't have to pull the full lump sum tax payment from it. Having a lower balance on the HELOC means you lose less money overall.
Deal Fanatic
Jan 19, 2017
8116 posts
4739 upvotes
eblend wrote: Hi All,

So I own a property in Calgary and have up to this point been paying property tax as a yearly lump sum. I am now building a second home as an owner/builder on an acreage that we bought a few years back, which means that my property taxes are now, for the duration of construction (another year at least) will be are like 3x what it used to be as the new house is about 2x the price of the existing one.

I am using the equity in my paid off first home to finance the construction of the new one. Since it's a HELOC and the government keeps jacking interest rates, I think the interest rate on there is now at like 7%... .

The way I manage my finances now is that I put everything I can on the credit card for simplicity, and then do a HELOC > Chequeing account transfer 3 days before credit card bill is due, and a scheduled payment a day later. The moment I get paid I send most of the money towards paying off the HELOC principal, with the only hold back being to cover the monthly interest which automatically gets withdrawn from my chequing account. This works well as I maximize the interest free period with credit cards and don't have to have a bunch of money sitting in chequing account for other direct withdrawals that I could use to pay off the HELOC principal instead.

Our city and the new county where I am building have a TIPP program, which basically, interest free, allows you to pay monthly simply by taking the amount and dividing it by 12. I have been thinking of applying for this for both properties, but then I was thinking if it's actually worth it. At first glance it looks like a no brainer...interest free for 12 months vs paying interest at 7%....but I don't think it's that simple.

If I pay in lump sum for both properties, I can pay off the lump sum for this in a month...vs. paying monthly and holding back more funds in my account every months for TIPP x2, thus reducing my principal repayment monthly so that I have enough funds to cover Interest + 2x TIPP payments. I can't seem to wrap my head around what's more beneficial over the course of the year. I think logic says that TIPP would be more beneficial regardless...but just wanted some confirmation from people smarter than me.
If you are putting everything, including property tax, on the credit card, you should get a cc that you can earn some reward from paying your tax. Also you are not getting interest free for the whole tax amt for 12 months using TIPP since they take money every month. The average is about 6 months interest free. My city's property tax due date is June 30 every year. So that would even reduce your interest free time length. YOu should save up the first 6 month's TIPP payment yourself and put the money into a high interest saving acct to earn some interest for 6 months. Then use your cc to pay the whole tax off on June 30. Then pay off your cc statement balance in July when it is due , by taking money from your HELOC. Then pay off your HELOC balance like you are doing now.
Last edited by ml88888888 on Feb 1st, 2023 12:01 pm, edited 1 time in total.
[OP]
Deal Addict
Jul 21, 2005
2053 posts
1104 upvotes
Alberta
ml88888888 wrote: If you are putting everything, including property tax, on the credit card, you should get a cc that you can earn some reward from paying your tax. Also you are not getting interest free for the whole tax amt for 12 months using TIPP since they take money every month. The average is about 6 months interest free.
I usually use my Canadian Tire CC to pay property taxes, so I do get some benefit out of it. Can you elaborate on the interest free part for 6 months? Sorry a bit confused, was always under the assumption it was just the amount /12 and that's it?
Deal Fanatic
Jan 19, 2017
8116 posts
4739 upvotes
eblend wrote: I usually use my Canadian Tire CC to pay property taxes, so I do get some benefit out of it. Can you elaborate on the interest free part for 6 months? Sorry a bit confused, was always under the assumption it was just the amount /12 and that's it?
Does your city have a due date if you pay the whole tax off with lump sum? My city has June 30 due date every year.
This is my logic for the 6 months interest free on the whole tax amt: if your tax amt is $1200 for the year, then TIPP wil take $100 every month from your bank acct. so the remaining $1100 will enjoy interest free for the first month. then the next month another $100 is withdrawn, so only $1000 is getting interest free for the 2nd month. If you continue with my logic, then you will get this result: $1100 interest free for a month + $1000 interest free for a month + $900 interest free for a month + $800 interest free for a month + $700 interest free for a month + $600 interest free for a month + $500 interest free for a month + $400 interest free for a month + $300 interest free for a month + $200 interest free for a month + $100 interest free for a month. So the average is about 6 months of interest free on the whole $1200 tax.

But you are already getting the first 6 months interest free if you pay with lump sum on or before June 30. So TIPP won't even get 6 months interest free on the whole tax amt.

I think TIPP is only good for people who doesn't have the discipline to plan & save money for future expenses. it is like a forced saving plan. You can do the saving plan yourself.

Calgary has the same June 30 due date for property tax lump sum payment: https://www.calgary.ca/property-owners/ ... lties.html

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