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Property taxes are the annual taxes a municipality levies on a home based on its assessed value, counted as one of the four inputs to GDS/TDS qualification and often collected together with the mortgage payment.
Many lenders add a tax portion to the borrower’s regular mortgage payment, particularly on insured high-ratio files, collecting funds over the year and remitting them to the municipality directly — the four combined costs are often shortened to PITH (Principal, Interest, Taxes, Heat).
Property taxes are also one of the components used to calculate both the GDS and TDS ratios during qualification, so underestimating them can affect how much a buyer qualifies to borrow.
Each municipality sets its own tax rate, and each province runs its own property assessment process, so amounts vary widely by location and are not the same as market value or purchase price. If a seller prepaid taxes for the year, the buyer reimburses their share through the statement of adjustments at closing rather than paying the municipality directly right away.
Counted in every qualification ratio: property taxes are one of the four components of PITH used to calculate both GDS and TDS during mortgage qualification.
Often collected with the mortgage payment: many lenders, particularly on insured high-ratio files, add a tax portion to the regular payment and remit it to the municipality on the borrower’s behalf.
Set locally, not federally: each municipality sets its own tax rate and each province runs its own property assessment process, so amounts vary widely by location.
Adjusted at closing: if the seller prepaid taxes for the year, the buyer reimburses their share through the statement of adjustments rather than paying the municipality directly at first.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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