Property tax arrears in Ontario: what each month behind costs and how refinancing can clear it
Property tax arrears in Ontario grow every month, and after about two years a municipality can start the tax sale process. Here's what penalties and interest can cost, the timeline to watch and how refinancing, a HELOC or other options can clear the balance.
Property tax arrears in Ontario carry a penalty of up to 1.25% on the first day of default plus interest of up to 1.25% a month (up to 15% a year), set by each municipality under the Municipal Act, 2001. If taxes are still owing on January 1 of the second year after they became due, the municipality can register a tax arrears certificate; you then have one year to pay the full cancellation price before the property can be offered for public sale. In our example, $12,000 of arrears costs about $150 a month in interest at the maximum rate, while adding $15,000 to a refinanced mortgage at an illustrative 4.59% over 25 years adds about $84 a month. Refinancing, a HELOC, a payment arrangement with the municipality or, for some owners, a second mortgage can clear arrears, OAC.
Key takeaways
- →Property tax arrears in Ontario grow monthly: municipalities can charge a penalty of up to 1.25% when you default plus up to 1.25% interest a month on what's unpaid.
- →The tax sale clock is about two years: a tax arrears certificate can be registered when taxes are still owing on January 1 of the second year after they were due.
- →After registration, you have one year to pay the full cancellation price, and partial payments are generally not accepted unless you sign an extension agreement.
- →Refinancing or a HELOC can clear arrears at a lower rate, if your equity, income and credit qualify, OAC.
- →Call early. Your municipality, your lender and a licensed mortgage agent all have more options before a certificate is registered.
Short answer: Property tax arrears in Ontario get more expensive every month, and if they sit long enough the municipality can start a tax sale. Under the Municipal Act, 2001, a municipality can add a penalty of up to 1.25% on the first day of default and interest of up to 1.25% a month on unpaid taxes [1][3]. If taxes are still owing on January 1 of the second year after they were due, the municipality can register a tax arrears certificate, which starts a one-year countdown to a possible public sale [2].
This guide is for Ontario homeowners who are behind on property taxes and want to know what it's costing, how much time they have and whether refinancing makes sense. Most people in this spot have equity in the home; the question is how to use it before the costs and the deadline get worse. If you're juggling other debts too, our debt consolidation mortgage options may help you roll everything into one plan.
How property tax arrears work in Ontario
Property tax has a municipal portion and an education portion, and your local municipality prepares and collects the bill [9]. When an instalment isn't paid by its due date, the amount becomes overdue and the municipality's late-payment charges begin.
The Municipal Act, 2001 lets each municipality set its own charges, within limits [1]:
- Penalty: up to 1.25% of the unpaid amount on the first day of default [1][3].
- Interest: up to 1.25% a month on unpaid taxes, which works out to up to 15% a year [1][3].
Each municipality sets its own rates and dates, so check your tax bill or your municipality's website for the exact charges. The City of Toronto sets its charges under its own legislation, so Toronto owners should confirm with the city.
What arrears can cost: an example
Example: you own a home in Ontario with yearly property taxes of $6,000 and you've missed two years, so $12,000 is owing. At the maximum interest rate of 1.25% a month, that's about $150 a month, or $1,800 a year, in interest alone, before any penalties or fees.
| Option to clear $12,000 of arrears (plus about $3,000 in charges) | Approx. monthly cost |
|---|---|
| Leave it unpaid (interest at 1.25% a month on $12,000) | about $150, and the balance doesn't go down |
| Add $15,000 to a refinanced mortgage at 4.59% over 25 years | about $84 (principal and interest) |
| Add $15,000 at 4.99% over 25 years | about $87 (principal and interest) |
| $15,000 second mortgage at 9.99%, interest only | about $125, and the balance doesn't go down |
Example rates are for illustration only, as of November 4, 2026, and are not an offer. Mortgage payments use Canadian semi-annual compounding. Refinancing has its own costs, such as legal, appraisal and possibly a prepayment penalty, which aren't included here. Your actual rate and terms depend on your situation, OAC.
What it shows: a refinance usually costs less per month than letting arrears build, but it stretches the debt over many years. That's why it's worth comparing the total cost, not only the payment. Our guide to refinance costs in Canada breaks down the fees to expect.
The tax sale timeline to watch
| Stage | What happens |
|---|---|
| Taxes become overdue | Penalty and monthly interest can start [1][3] |
| January 1 of the second year after the taxes were due | If taxes are still owing, the municipality can register a tax arrears certificate on title [2] |
| After the certificate is registered | You have one year to pay the full cancellation price (taxes, penalties, interest and costs) [2] |
| During that year | Partial payments are generally not accepted unless you sign an extension agreement with the municipality [2] |
| If the year ends unpaid | The property can be offered for sale by public auction or tender [2] |
Timeline based on the Municipal Act, 2001 as described by the City of Brampton; check your municipality's process and dates.
The key point: you have the most room before a certificate is registered. Once it's on title, the full cancellation price has to be paid in one go unless the municipality agrees to an extension.
Behind on property taxes? A licensed 8Twelve agent can check whether your equity and income support a refinance or HELOC to clear the arrears, comparing options across 65+ lenders, OAC. Explore debt consolidation options
How property tax arrears affect your mortgage
In our experience, most mortgage contracts require you to keep property taxes paid, because unpaid taxes can take priority over the lender's charge on the home. If your lender finds out about arrears, it may pay the taxes and add the amount to your mortgage balance, or treat the arrears as a breach of your mortgage terms. Read your mortgage contract and talk to your lender early; FCAC recommends contacting your lender as soon as you're having trouble making payments [6].
Arrears also affect how a new lender sees your application. Lenders count property taxes when they calculate your gross debt service (GDS) and total debt service (TDS) ratios [8], and in our experience most lenders want the arrears paid out of the refinance proceeds on closing.
Ways to clear property tax arrears
| Option | How it works | Things to know |
|---|---|---|
| Payment arrangement with the municipality | Ask about a payment plan before a certificate is registered; after registration, only an extension agreement allows partial payments [2] | Interest keeps running on the unpaid balance [1] |
| Refinance your mortgage | Borrow up to 80% of your home's value to pay off arrears and other debts [5] | You may pay a prepayment penalty, legal and appraisal fees; you must qualify, OAC |
| Home equity line of credit (HELOC) | Borrow up to 65% of your home's value, combined with your mortgage up to 80% [5] | Variable rate; interest-only payments can keep the balance from going down [5] |
| Second mortgage | A separate loan behind your first mortgage | Higher rates and fees; FSRA says alternative/private mortgages are meant as a short-term option with a clear exit plan [7] |
| Senior homeowners' property tax grant | Eligible Ontario homeowners 64+ with low to moderate income can get up to $500 a year [4] | Helps with current taxes; it won't clear large arrears on its own |
If you have at least 20% equity and steady income, a refinance is often the cleanest way to clear arrears and other high-interest debt in one step. If your mortgage is mid-term with a low rate, compare the penalty against a HELOC or second mortgage; our guide on HELOC vs refinance walks through that choice. If arrears have hurt your credit, our guide to refinancing with bad credit in Canada explains what lenders look at.
Step by step: clearing arrears with a broker
- Get the exact amount owing from your municipality, including penalties, interest and the date a certificate could be registered.
- Gather your documents: mortgage statement, property tax bill, proof of income and a list of other debts.
- Check your equity. Your home's value minus your mortgage and any HELOC balance shows how much room you have under the 80% limit [5].
- Compare options with a licensed agent: refinance, HELOC, second mortgage or a municipal arrangement, including all fees.
- Close and pay the municipality directly from the proceeds, then set up pre-authorized tax payments so it doesn't happen again.
When refinancing may not be the answer
If the arrears are small and you can pay them within a few months, a payment arrangement or extra payments may cost less than a refinance with fees and a possible penalty. If your income has dropped and the new payment would still be a stretch, adding to your mortgage only moves the problem. In that case, talking to your lender about relief options [6] or to a non-profit credit counsellor can come first. And if you're 55 or older with limited income, a reverse mortgage in Ontario is another option, though property taxes must still be kept up afterward.
From our desk: the property-tax files we can help most are the ones that reach us a year or more before the certificate date. When a client calls after registration, the cancellation price has to be paid in full, which narrows the options and the time to close.
Property tax arrears in Ontario add up quickly, and the tax sale process has firm deadlines. If you have equity, a refinance or HELOC can clear the balance at a lower cost than letting interest run, but compare the full cost and act before a certificate is registered.
Next step: see what consolidating could change with our debt consolidation calculator.
This article is for general information only and isn't financial, legal or tax advice. Rates, products and terms change without notice and are available on approved credit (OAC). The rate and terms you qualify for depend on your individual financial situation, including credit, income, property and loan-to-value. "Best rates" means the most suitable options available for your situation, not a guarantee of the lowest rate. Example rates and payments are for illustration only, as of October 2026, and are not an offer. 8Twelve Mortgage arranges mortgages through 65+ lenders and does not lend directly. Licensed across Canada — see our licences.
Consolidating unsecured debt or tax arrears into your mortgage may lower your monthly payment but can increase the total interest paid over the amortization period. Examples are for illustration only, as of November 4, 2026, and are not offers. Municipal penalty and interest rates, payment options and tax sale steps vary by municipality; confirm with your municipality. Rules checked against the Municipal Act, 2001, City of Brampton and City of Kingston pages, FCAC and FSRA on November 4, 2026. 8Twelve does not fund second or private mortgages; we arrange them with third-party lenders, and lender and brokerage fees will be disclosed in writing before you commit.
Frequently asked questions
Sources
- Municipal Act, 2001, S.O. 2001, c. 25 (ss. 345, 373, 379) - Government of Ontario
- Tax sales - City of Brampton
- Property tax late payment fee - City of Kingston
- Senior homeowners' property tax grant - Government of Ontario
- Borrowing against home equity - FCAC
- If you're having trouble making your mortgage payments - FCAC
- Private mortgages - FSRA
- Calculating GDS / TDS - CMHC
- Property tax - Government of Ontario
Last reviewed on November 5, 2026