What is the BC Property Tax Deferment program?
The BC Property Tax Deferment program is a lower-interest loan program offered by the province of BC for those in need. The province will pay your municipal property tax bill and charge you competitive interest rates for the money loaned to you.
Furthermore, the BC government does not require you to repay the loan or make interest payments while using the program, only when there’s a triggering event. This low-cost loan program can help those on a fixed income looking to increase their cash flow.
Eligibility:
The regular program is for individuals that are either:
a) 55 years or older during the current year,
b) A surviving spouse of any age, or
c) A person with a disability.
You must be up to date on your current property taxes to apply. Keep in mind that once you begin to defer, the program doesn’t automatically renew every year. You must apply each year that you want to defer.
Minimum Equity:
For the regular program, you need to have a minimum 25% equity in your home, based on the property’s assessed value.
Important Note About Liens
Since the BC government is lending you money against a secured asset (your home), they do register a restrictive lien against the property. This will show on the land title office and on your credit profile once you begin to defer your tax. It could also affect your future borrowing capability, especially if you plan on refinancing an existing home loan or getting a new loan against the property. If you plan on making any title changes or securing a loan against the property, it would be wise to do so before applying for the program, as it could impact your ability to do so.
For instance, you would not be able to do the following without first paying off your loan;
Adding someone on the title who isn’t your spouse
Removing someone from the title who isn’t deceased
Refinancing an existing mortgage or property loan or getting a HELOC against the home (check with your lender first to see if they require their lien to be first priority)
A loan balance should not be an issue if you decide to sell your home in the future, but it will show up as a charge against title. Your real estate lawyer will need to clear this upon sale. Make sure this is discussed with your realtor as well.
If you have any debt against your home, or are considering taking a loan against your home, we recommend you speak with your lending specialist prior to applying.
Also, because it is a lien, it could slightly increase the cost of your home insurance. You would want to check with your home insurance provider for more details.
Simple vs. Compound Interest
One important feature of the deferment program is that the interest charged is simple interest. Simple interest means that interest is not charged on previous interest, so there is no compounding effect.
The interest rate is 2% below the prime rate of BC’s prime banker. The best rate most borrowers can get on a HELOC is prime rate with a minimum requirement to make at least interest-only payments. Another option could be a reverse mortgage credit facility that may not require interest payments but generally is priced above prime rate.
Another important feature of the program is that you are not required to make interest payments. As interest accumulates, it is simply added to the total loan balance.
Frequently Asked Questions:
Can I repay the loan amount at any time?
Yes, you can. There is no restriction or penalty, you simply contact the BC government, request the outstanding balance, and either pay in full or make a partial payment.
Can interest rates go up?
Yes, the interest rates can go up or go down, as they are linked to the prime rate. Rates are historically locked for a certain period of time and adjusted to prime at regular intervals.
How do I apply?
See links at the end of this post.
Can I apply if I am 55 but the joint property owner is not 55?
Yes, you can, only one of the owners needs to qualify.
I already paid my property taxes for this year; can I defer this year?
No, you must wait until the following year.
Is the program right for me?
Each individual circumstance is unique and should be discussed with a financial planner or lending professional. Please keep in mind the program involves taking on debt that comes at a cost.
The Bottom Line:
The government introduced the plan to help property owners on a fixed income or in a difficult financial situation due to death or disability. If you wish to remain in your home and are comfortable taking on debt to do so, investigate the program in further detail and get some professional advice.
Useful Links:
Information on the program: Apply for or renew a property tax deferment program application - Province of British Columbia (gov.bc.ca)
This information contains the current opinions of the Author and such opinions and the facts on which they are based are subject to change over time without notice. This material is distributed for informational purposes only and is not intended to provide personalized legal, accounting, tax or specific investment advice. Please speak to a Westmount Wealth Advisor regarding your unique situation.
This information has been prepared by Joe Basque, CFP®, CIM® who is a Wealth Advisor for Westmount Wealth Management Inc. and an Insurance Advisor for Westmount Wealth Planning Inc. Westmount Wealth Management Inc. is registered as a Portfolio Manager in British Columbia, Alberta, and Ontario. Westmount Wealth Planning Inc. is a subsidiary of Westmount Wealth Management Inc.
