Gynet Gloria KOZUB
Your Financial Institution is “Paying the Property Taxes” for You. What Does This Mean For You?
Some financial instructions offer borrowers the possibility of having them administer the payment of property taxes for you. If you find this applying to you, here are some things you should know:
1. You are still required to do the necessary adjustments between purchaser and vendor. This means that if the vendor has paid more in taxes than their respective responsibility for a given year, you must reimburse them even if you are contributing to the taxes through your mortgage payments. The agreement between you and your bank does not affect your vendor.
2. When the bank collects your mortgage payment, the portion reserved for the taxes is set aside to be used when the next payments become due. This does not mean that they are sending an amount to the city and/or school board monthly.
3. If you are purchasing at a time of year where any or all tax payments have already been made, the bank does not adjust the amount collected. They simply apply the amount collected to the next payment owed.
4. If, at the end of your term, the bank has a surplus amount of funds that were collected for taxes, this amount will be remitted to you. This also applies if you refinance or sell the property before the end of your term. You will see this amount deducted from the total amount you owe them on the payout statement they will provide.
5. Even if the bank is administering your payments, as property owner you must ensure that they have the necessary information to be able to make payment. You are required to forward a copy of the tax statements to them on a yearly basis.
6. Because tax amounts change from year to year, it is possible that the bank adjusts your mortgage payment amount based on the tax amount on a given year to ensure that they have sufficient funds to make full payment.
For questions regarding the payment amounts or any question related to the logistics of the tax payments, please contact your mortgage broker and/or your financial institution.