When you're budgeting to purchase your first home, factoring in only what you'll be paying for your mortgage isn't the only expense you need to think about. Property taxes are often not talked about, largely because a lot of first time home buyers don't understand them. To help you understand we put together a crash course on what property taxes are.
What are property taxes?
A property tax is a municipal tax determined by land use and the value of the property. If the property is zoned residential, it is taxed differently than a commercial property. Property taxes are collected to pay for municipal infrastructure including emergency responder programs, law enforcement, road work, and public health programs.
How are property taxes determined?
Property taxes are determined based upon the assessed value of the property you own. The value of all of the properties in the municipality are added up, and all of the costs that the city requires is also added up. Then, the total cost of the city run services is divided by the total value of all of the properties. The result of that is the tax rate.
This tax rate is applied to the value of your home. For example, if the tax rate is 4%, you will pay 4% of your home's value in property taxes annually. The higher your home's value, the higher property taxes you will pay.
How do property reassessments work?
Houses in Niagara are reassessed every four years. The Municipal Property Assessment Corporation (MPAC) is responsible for the reassessment of over 5 million properties in Ontario, in compliance with regulations set by the Government of Ontario. Every 4 years they mail a Property Assessment Notice to every property in Ontario. The previous notice was mailed in 2016, and was the assessed value as of January 1, 2016. The next property assessment will be in 2020.
In order to reassess and determine your home's value, MPAC analyses sales of comparable houses in your area, and also assess features of the current real estate market of your area. This allows them to understand what your home is worth currently, and this valuation assessment is used in determining your Niagara property tax.
A Guide For First Time Home Buyers
If you find yourself a little lost or confused during the home buying process, that's understandable. Download our free Real Estate Glossary to help navigate the complicated real estate jargon and make the home buying process much easier.