Property Taxes - Bank or City payment

[trueimage]

Hi,

I'm trying to lower my monthly bills, and I was looking at my mortgage payment to TD. This includes a Property Tax portion of $277.74 / mo which works out to $3,332.88 per year.

I just moved in 7 months ago, and can't recall the last assessment but the property was bought for around $330,000, downtown.

Using a rate of 0.0058734, shouldn't my bill really be under $2000 and if so, why would I pay TD an extra $1300/year..

I guess my questions really are:

1. Should I pay this to the bank, go on the TIPP payment plan with the city, or just pay no one and pay it out of my savings in June?

2. How can I get my assessment to be lowered, since the market seems even more depressed now than when I bought.

[Bill Bumface]

$277.74*9= $2499.66, assuming you're only making 9 mortgage payments in 2010 because of your move in date.

[Ducay]

Originally Posted by trueimage

I guess my questions really are:

1. Should I pay this to the bank, go on the TIPP payment plan with the city, or just pay no one and pay it out of my savings in June?

2. How can I get my assessment to be lowered, since the market seems even more depressed now than when I bought.

1. I use TIPP just because its easy. Using the bank to pay them just adds another potential point for confusion or error. At the end of the day, it should still amount to the same tax payments, so why use a middleman?

2. You have to request a re-assessment during the annual review period, once initial assessments are mailed out. This time has passed for this year, so keep an eye out for it next year. It also cost $40 IIRC to get them to review it (win or lose).

[DownhillGoat]

Originally Posted by trueimage

or just pay no one and pay it out of my savings in June

This one right here. I'm not a fan of the tipp program. I'd rather put the money aside and make interest off it. No sense in the city getting interest off my money.

[trueimage]

Just an update, the bank says that I can't go off the bank program because I don't have 20% equity and CMHC won't let me do TIPP or anything other than paying the bank.

Also it is so high because they had to pay the 1900 in june and only had 2 months collected by then, so the first 2 years are higher, then it should drop by $100 or so per month.

[sparky69]

Originally Posted by trueimage

Just an update, the bank says that I can't go off the bank program because I don't have 20% equity and CMHC won't let me do TIPP or anything other than paying the bank.

They are lying about that. I dont have 20% equity in my house and im on the tipps program and have been since day one

[Mike Oxlong]

Originally Posted by trueimage

Just an update, the bank says that I can't go off the bank program because I don't have 20% equity and CMHC won't let me do TIPP or anything other than paying the bank.

Also it is so high because they had to pay the 1900 in june and only had 2 months collected by then, so the first 2 years are higher, then it should drop by $100 or so per month.

BS!!!
I deal with clients everyday who don't have 20% equity and they are on the TIPP program. That may be TD's rule but it has nothing to do with CMHC.

Banks have an amazing ability to eff up the tax payments. Pay to the city dorectly whether you save the money or go on the TIPP plan. As someone else said there is no point involving another party, especially a bank.

You may have to show them proof you are on the TIPP plan but if you fight and bitch enough hopefully they will let you switch.

[onetwo_threefour]

Scotiabank insists on PIT when first-time buyer and CMHC. Certain branches of TD claim that to be their company wide policy as well although I know that it is not actually true.

As far as I know (I am a real estate lawyer who deals with at least 20 different banks/lenders) it is not a CMHC requirement, although it may be recommended (I can't say as I don't have access to CMHC's interactions with the lenders). I do know that I have had first time buyers with CMHC insured loans not being required to be PIT within the last year. If I have to think, I believe this would be with CIBC, and their brands (Firstline, President's Choice) and BMO, and at least a few others. TD and Scotia both seem to be on the PIT bandwagon although I don't think it's 100% with TD where it is with Scotia.

[Mike Oxlong]

Originally Posted by onetwo_threefour

Scotiabank insists on PIT when first-time buyer and CMHC. Certain branches of TD claim that to be their company wide policy as well although I know that it is not actually true.

As far as I know (I am a real estate lawyer who deals with at least 20 different banks/lenders) it is not a CMHC requirement, although it may be recommended (I can't say as I don't have access to CMHC's interactions with the lenders). I do know that I have had first time buyers with CMHC insured loans not being required to be PIT within the last year. If I have to think, I believe this would be with CIBC, and their brands (Firstline, President's Choice) and BMO, and at least a few others. TD and Scotia both seem to be on the PIT bandwagon although I don't think it's 100% with TD where it is with Scotia.

Scotia isn't 100% either. I have had lots of Scotia clients that have just had to show they are set up on the TIPP program and Scotia accepts that.

[ShotDownInFlames12]

^^ Nope. Its a Scotia policy, under 20% down, has to be administered by the bank.

That being said, there are lots of people that get around this because branches don't realize this policy, and set the customer up on TIPPS, so really it depends on where you deal unfortunately.

[GGG]

The big reason for this from the Banks perspective is they want to be then only lien holder on the property. If the property goes into forclosure the bank doesn;t want other creditors getting in the way.

When I was on a Condo board a bank paid out the condo fees one unit owned after we placed a lein on the property.

[Deegee]

I'm not at work at the moment so I am going off memory, but I believe the lender must confirm property taxes are paid in full yearly as a requirement of CMHC insurance.

As a result, most lenders prefer to have the client setup on PIT payments rather then PI.

[jjbouma]

Originally Posted by ShotDownInFlames12

^^ Nope. Its a Scotia policy, under 20% down, has to be administered by the bank.

That being said, there are lots of people that get around this because branches don't realize this policy, and set the customer up on TIPPS, so really it depends on where you deal unfortunately.

I was a first time buyer this year with under 20% down on Scotia. They set me up on PIT automatically but when I told them I was enrolled in the TIPP program I just had to come into the main branch and sign a form to make it only PI payments.

[V]

I've had the same experience.

[yads]

You can get them to lower the payments, the bank administered program is just a separate account so if your taxes are lower than what you're paying into it, you'll have a credit. Call them up and find out how much you're paying and also try to get off of it if you can. We had so many problems with Scotiabank not paying the taxes properly. The first year they didn't pay the whole amount that was owed another year they didn't pay for our condo parking spot.

[Deegee]

This is from the standard CMHC mortgage terms for Land Titles South Office; I suspect the North Land Titles Office standard CMHC mortgage terms to be simular if not identicle.

12. Payment of Taxes and Other Charges

Subject as hereinafter in this paragraph provided, the Mortgagor will pay as and when the same fall due all Taxes, rates, liens, charges, encumbrances or claims which are or may be or become charges or claims against the Mortgaged Premises or on the Mortgage or on the Mortgagee in respect of the Mortgage; provided that in respect of municipal‑taxes, rates, assessments and levies, property taxes, school taxes and local improvements charges and rates (hereinafter referred to as "Property Taxes") chargeable against the Mortgaged Premises:

(a) The Mortgagee may deduct from the final advance of money secured by the Mortgagean amount sufficient to pay the Property Taxes which have become or will become due and payable on or before the day preceding the Interest Adjustment Date and are unpaid at the date of such final advance.

(b) After the Interest Adjustment Date the Mortgagor will pay to the Mortgagee on the Instalment Dates, sums sufficient to enable the Mortgagee to pay the whole amount of Property Taxes on or before the due date for payment thereof or, if payable in instalments, on or before the due date for payment of the first instalment thereof.

(c) Where the period between the Interest Adjustment Date and the next following annual due date for Property Taxes is less than one year the Mortgagor will pay to the Mortgagee in equal instalments, during such period and during the next succeeding 12‑month period, an amount estimated by the Mortgagee to be sufficient to pay, on or before the expiration of the said 12‑month period, all Property Taxes which shall become due and payable during the said two periods and during the balance of the year in which the said 12‑month period expires; and the Mortgagor will also pay to the Mortgagee on demand the amount, if any, by which the actual Property Taxes exceed such estimated amount.

(d) Except as provided in the last preceding clause, the Mortgagor shall, on each and every Instalment Date, pay to the Mortgagee, a portion of estimated Property Taxes appropriate to secure full payment (as estimated by the Mortgagee in its sole discretion) of the Property Taxes next becoming due and payable; and the Mortgagor shall also pay to the Mortgagee on demand the amount, if any, by which the actual Property Taxes exceed such estimated amount.

(e) The Mortgagee shall allow the Mortgagor credit for interest at not less than the prevailing rate allowed by Canadian chartered banks on personal savings deposits with chequing privileges, on the minimum monthly balances standing in the mortgage account from time to time to the Mortgagor's credit for payment of Property Taxes, such interest to be credited to the mortgage account not less frequently than once each year; and the Mortgagor shall be charged interest, at the Interest Rate, on the debit balance, if any, of Property Taxes in the Mortgagor's mortgage account outstanding after payment of Property Taxes by the Mortgagee, until such debit balance is fully repaid.

The Mortgagee will apply such deduction and payments on the Property Taxes chargeable against the Mortgaged Premises so long as the Mortgagor is not in default under any covenant, proviso or agreement contained in the Mortgage, but nothing herein contained shall obligate the Mortgagee to apply such payments on account of Property Taxes more often than yearly. Provided, however, that if, before any sum or sums so paid to the Mortgagee shall have been so applied, there shall be default by the Mortgagor in respect of any payment of principal or interest or other Indebtedness as in the Mortgage provided, the Mortgagee may apply such sum or sums in or towards payment of the principal or interest or other Indebtedness in default. The Mortgagor further agrees to transmit to the Mortgagee the assessment notices, tax bills and other notices affecting the imposition of Property Taxes forthwith after the receipt of same by the Mortgagor.

Notwithstanding the foregoing provisions, the Mortgagee may request the Mortgagor to pay the Property Taxes as and when such Property Taxes become due and to submit to the Mortgagee tax receipts evidencing the payment of the Property Taxes within 30 days after they become due.

Seems like the Financial Institution can force you to do PIT from the above, but they can allow you to opt out of it if you want. Seems like they can request confirmation of taxes paid on an annual basis if they aren't paying them.

Does one our resident lawyers want to comment? Trout?

[onetwo_threefour]

^ The standard CMHC terms were created by CMHC, but they are no longer widely used even for CMHC-insured mortgages. Almost all lenders have their own set of standard terms for both Conventional and High Ratio mortgages (including CMHC). CMHC doesn't mandate the use of their terms, and if I remember correctly I don't think they've been updated since 1998.

Instead, each banks terms will have similar language to what you see above, but each financial institution has their own policies. The term in the Standard Form Mortgage is somewhat irreleveant. Either the bank agrees to lend you money or they don't and they can impose any requirements they choose as long as they are not unconscionable or illegal.

If TD decides tomorrow that they want to pay clients' Condo fees, property taxes, house insurance and require a client to post a cash bond up front to borrow money, they can do so. Whether they would do this type of thing depends on how badly it would hurt their mortgage business if other lenders aren't doing the same thing. There's no magic language out there anywhere that restricts them from imposing these kinds of conditions on lending their money to you.