Unpaid property taxes in Ontario accumulate interest and, if left long enough, can lead a municipality to begin a tax sale process. Municipal tax arrears also rank ahead of mortgages in priority, which is why lenders treat them seriously and generally require them cleared. Home equity is one route homeowners use to bring them current.
Why lenders care so much about this
Municipal property tax arrears hold priority over registered mortgages. A lender in first position can find a tax claim ranking ahead of them, which directly threatens their security. As a result most lenders require taxes current as a condition of funding, and many will pay them out of the advance on closing rather than trusting it to happen afterwards.
It’s also treated as a signal. Arrears on something as fundamental as property tax prompts closer scrutiny of the rest of the file.
How the municipal process works, broadly
Interest accrues on the outstanding balance. After taxes have been in arrears for a statutory period — commonly around two years, though this varies — a municipality may register a tax arrears certificate, which begins a formal process that can ultimately lead to a tax sale.
The specific timelines, notice requirements and redemption periods vary by municipality and are governed by provincial legislation. If you have received a tax arrears certificate or any formal notice, speak to a lawyer and your municipality promptly.
Routes to clearing them
- A payment arrangement with the municipality — many will accept instalments; ask first, it costs nothing
- A second mortgage — clears the arrears while leaving your first mortgage untouched
- Refinancing — where qualification allows and the existing rate makes it sensible
- Adding taxes to the mortgage payment going forward, so it doesn’t recur
That last point matters. Clearing arrears without changing how taxes get paid tends to produce the same problem again. Having the lender collect and remit taxes with the mortgage payment removes the risk entirely.
Costs and risks
Expect the usual second or private mortgage costs: a higher rate than prime, lender fee, brokerage fee where applicable, legal, appraisal and registration. Weigh that against accruing municipal interest and the escalating consequences of the arrears process.
- The debt becomes secured against your home
- Missed payments can have serious consequences
- Private financing costs more and renewal is not guaranteed
- If the underlying affordability issue isn’t addressed, arrears can rebuild
- Final approval depends on the complete application and lender review
Documents generally needed
Property tax statement showing the arrears, any municipal correspondence including arrears certificates, mortgage statement, proof of insurance, photo ID and income documents.
Frequently asked questions
Can I lose my home over property taxes?
A municipal tax sale process exists and can ultimately result in sale of the property. It takes years and involves formal notice, and most situations are resolved well before that point — but it is a real process, not a theoretical one. Address it early.
Will the municipality accept payments?
Many will. Practices vary, so contact your municipal tax office directly — there is no cost to asking, and an arrangement may be considerably cheaper than borrowing.
Keep reading
This page is general education about mortgage options in Ontario. It is not legal, accounting, tax or insolvency advice, and it is not an offer of credit. Please seek independent professional advice for your own situation.