We have heard over that last few years of many families and individuals enduring financial hardship. Unfortunately, there are people who are facing losing their homes.
I have mixed feelings about the Property Tax Deferment Program in BC. I want to be clear that these are suggestions below are to help you think through your situation. None of these comments are in any way a substitute for professional financial advice. An accountant or financial advisor has the real expertise to assist you.
I think if you are desperate and in need of some breathing room temporarily tax deferment might be an option you want to consider. The program allows you to defer paying your property taxes until you sell your house. It is a form of low interest loan.
There are programs for families with children as well as a different program for those that are 55 years old and over, a surviving spouse or for those with disabilities. Each program requires you to have 15%-25% in equity available for your property.
Find out the details at this web site:
When you sell the property you will need to pay your outstanding debts including the tax deferment loan and any mortgages on the property so the higher the debts the less money in your pocket. This does make it very difficult at the time of Selling. Sellers quite often will think about the money they need to get out of the transaction, where the Buyer is only concerned with current market value and the debts of the Seller are not relevant to the transaction. Unlike a mortgage, unless you create a payment plan, your tax deferment loan will not decrease, it only increases.
If you are mortgage free and living on a low pension then I can see the benefit to seniors late in their lives. The few extra thousand a year in available income can make a huge difference. If the home will likely be sold as a part of their estate, at which time the loan can be paid in full, it really bears no financial burden to that individual while they are living.
For young families I see different options. Young families are at the start of their life and although the deferment of taxes can be tempting or a form of short term relief, overall it is not likely to make a huge difference to the overall financial situation for the family. Many compounded years built up may create a larger burden to the family's financial stability.
Starting a family can be a definite financial shift for many people. I know from personal experience how difficult it can be. A couple without children have no idea the luxury they have in their spending. You may dine out frequently, take regular vacations, buy extravagant gifts etc. When you have a child your income is drastically and suddenly reduced. If you are on maternity leave/parental benefits for a year, you only have a portion of your regular income. To compound on that your expenses have drastically increased to care for your child. You have added expenses of clothes, toys, diapers etc. You are likely to become reliant on the income of one individual and if that family member loses their job things crumble quickly. When one family member decides to stay home with the child beyond the year where your family can receive parental benefits then your finances are drastically cut again and the dependence on that one income is even more so.
If there is a young family who is under financial stress and looking at the tax deferment program I would suggest speaking to an accountant or if that is not possible seeking the financial opinion of those you respect around you, people that have successfully conducted and planned their finances.
Other options a young family may want to consider:
Selling your current home and finding a smaller home that meets your current needs. One that will allow for lower mortgage payments, heating costs and taxes. As you gain equity and financial stability you can either upgrade again in the future or use this new home as an investment home and rent it out while you purchase your new dream home.
Having a mortgage helper
If you have the option of creating a suite in your home or buying a home that can accommodate a suite, this added revenue maybe a huge financial help for you. Depending on your current rates $500 of rent can offset about $100,000.00 of your mortgage. If you have a suite that you can rent for $800/month this may be all you need to get back on your feet. If you are buying a new home maybe you want to consider buying a home where you can use the suite in the beginning and as your family expands and your financial stability is created you can eliminate the suite and add more living space for your family. This can be a great option for single people starting their life as well. This can be cheaper than renting. Please research the vacancy rate in your area.
If downsizing or having a mortgage helper does not appeal to you then another option you may consider is moving to community where the real estate is less expensive. It may mean a longer commute for anyone working in your family or it may mean a change of jobs. Only you can know what the best option is for your family.
Other cut backs
So downsizing, having a mortgage helper and moving does not appeal to you...then you may want to consider all the other areas in your budget you can cut back or eliminate costs. I do want to emphasise eliminate costs and not defer costs to a future date. Deferment of expenses can be a way of balancing your finances for the short the term but if they are costs that you will absorb one day then you are deferring them and they can eventually catch up to you.
The point of this blog was to make you aware of the tax deferment program offered in BC but it was also to give you food for thought for other options you may want to consider. In any case you will want to contemplate the short term and long term benefits and downfalls of each option.