TORONTO, ONTARIO--(Marketwired - June 25, 2013) - As property tax bills begin to roll in this summer, many property owners may be feeling the financial pinch of one of the largest tax burdens faced by Canadians.
For instance, based on the average house price in the Greater Toronto Area (GTA), the average property tax bill for 2013 would total approximately $4,000. In Vancouver, the annual property tax bill would total approximately $3,000.
Laura Parsons, Mortgage Expert, BMO Bank of Montreal, noted that the frequency of property tax instalments varies by municipality, but most allow you to pay your annual tax assessment through equal quarterly or monthly payments.
"In order to ensure you keep payments such as an annual property tax bill from disrupting household finances, try spreading them out so that you don't end up having to pay a large lump-sum amount," said Ms. Parsons. "This will provide adequate breathing room and help avoid having cash-flow problems for everyday expenses."
Ms. Parsons noted that BMO offers a property tax account that deducts a specified amount from a customer's scheduled mortgage payments and allocates the funds toward yearly property tax bills. The funds sit in the separate account within their mortgage account until taxes are due, typically once in January and once in June depending on the municipality.
She added that prospective buyers should keep these additional costs in mind when deciding what they can afford.
"When assessing whether or not a new home is financially realistic, remember that housing costs - including mortgage payments, utilities and taxes - should not take up more than one-third of your total household income," said Ms. Parsons. "If you can land safely within these parameters, then homeownership is an affordable and realistic option."
BMO offers Canadians the following payment scheduling tips to help prevent cash-flow problems:
Insurance Premiums: Consider making your insurance premium payments on a monthly basis. This way, you will not be scrambling for the funds when your 6-month or annual premium fee is due.
Registered Retirement Savings Plans (RRSP): RRSP contributions can be made throughout the year. Consider opting for an automatic payment schedule that takes a small portion off every paycheque and puts it towards your RRSP. One way to achieve this is via a Continuous Savings Plan (CSP), which regularly and automatically withdraws a specific amount of money from an individual's bank account and invests it directly into his or her RRSP - easing the cost of investing from one annual deposit, while helping to increase savings.
Tax-Free Savings Accounts (TFSA): When contributing to your TFSA, small amounts invested on a regular basis are best. Over time, even small monthly contributions of $50 to $100 will add up.
Registered Education Savings Plan (RESP): Do not be shy to ask relatives and/or friends to incorporate contributions to an RESP as a part of your child's birthday and other holiday gifts. Not only will this allow their RESP to grow, but it will provide you with some relief when juggling other regularly scheduled payments.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $555 billion as at April 30, 2013 and more than 46,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.
