Property tax arrears cleared before a municipal tax sale

The scenario

Consider a homeowner in the Niagara region with a detached, owner-occupied home. After losing their job, they fall behind on their property tax payments while trying to keep other household expenses current. As the arrears build up, the municipality registers a tax arrears certificate against the property and begins the tax sale process.

By the time a homeowner in this position reaches out, it is not unusual to see roughly 14 months of unpaid property taxes accumulated, with a firm deadline to resolve the situation before the home can be sold.

Why the banks say no

Traditional lenders decline applications like this because a tax arrears certificate has already been registered on title, and the borrower often has recent missed payments. Most A-lenders will not finance a property that is actively in a municipal tax sale process until the arrears have been cleared.

What we do

In a situation like this, we would arrange an interest-only private second mortgage through a private lender, on a one-year term with standard lender and broker fees. It provides enough to pay the outstanding property taxes before the municipal deadline, and it is structured with a clear exit in mind, giving the borrower time to rebuild their payment history before refinancing into a more traditional solution.

The outcome

The outstanding property taxes are paid before the municipality's sale deadline, which stops the property from being sold. The tax arrears certificate is cleared, the homeowner keeps their home, and regular monthly payments resume under a plan they can manage.

The exit strategy

A second mortgage like this is always meant to be temporary. The plan is to refinance into a B-lender mortgage after a year of consistent payments, then move to an A-lender once credit has recovered enough to meet standard guidelines again.

Facing something similar? Learn more about property tax arrears solutions, or stopping a power of sale in Ontario.

This is an illustrative example based on the types of property tax arrears situations we regularly help with. It does not depict a specific client, and the names, location, and figures are representative rather than actual. Individual results vary and are subject to lender approval.