If you own property, you pay property taxes.
TL;DR: property taxes are a guaranteed part of property ownership. The annual levy is based on the value of your property and the mill rate (tax rate) charged by your municipality (and province). Payments can be made annually, and usually can also be made monthly.
When you own a home you are required to pay property tax to the municipality you live in. This is a major source of revenue for the local government and is used to pay for costs like garbage collection, sewers, roads, snow removal, police and fire fighters. The tax rate is set by your local council and is a percentage of your property value. Provincial property taxes are typically collected by municipalities, and a portion of your property taxes is sent to the province the property is in.
How are property taxes determined?
Municipalities set the property tax rate for their area. It will usually be between 0.5 percent and 2.5 percent. That is the percentage of your home value that you will need to pay. That means, as your property value changes from year to year, so too will the amount of tax that you pay.
How do I pay the taxes?
We recommend to pay the municipality on your own in monthly, quarterly or annual payments. To do this you contact your local governing office either by phone or email and they can organize withdrawals from your bank account.
Sometimes, you will be required to have the property taxes paid on your behalf. If this happens, a property tax holdback may apply. You will have tax payments taken with your mortgage payments, and set aside into a sidecar account, accumulating money until the following June 30th, when taxes are typically due.
To keep the monthly tax contribution (payment into the side account) manageable, you may have to pay a holdback to make sure there's enough in the account come June 30th for an entire year's taxes. This can sometimes be sticker shock, because the holdback amount may be thousands of dollars, and the monthly contribution amount could be a lot higher on top of it. This is why whenever possible, we recommend to enroll directly with the municipality.
What if the seller prepays their taxes for the whole year?
If you are buying a home where the seller has already paid the property taxes for the year you will need to reimburse them for some of that amount.
When your real estate lawyer does your paperwork, they will indicate on the statement of adjustments how much you will need to pay to the seller for prepaid property taxes. How much you pay depends on how many days before the end of the year you close on the purchase.
For example, if your closing day is 100 days before the end of the year, you will need to take the total property taxes paid for the year and divide it by 365 (days of the year). That will give you a daily tax amount. You can then multiply the daily tax amount by 100 days. That will give you the total you need to pay the seller.