What happens to my mortgage if I stop paying property taxes in Ontario?

Property taxes are a municipal charge that take priority over most registered interests on a property, including your mortgage. This priority means that if property taxes go unpaid long enough for the municipality to pursue the property, a mortgage lender's security could be at risk. For this reason, most mortgage agreements in Ontario require you to keep property taxes current.

Many lenders — particularly when your mortgage is CMHC-insured or your loan-to-value is high — require you to pay property taxes through a tax installment collection plan built into your monthly mortgage payment. The lender collects the taxes with your mortgage payment and remits them to the municipality on your behalf. This protects the lender's security.

If your lender does not collect taxes with your payment and you fall significantly behind on property taxes, the lender may consider this a default of the mortgage agreement and take steps to protect its position — including advancing funds to pay the taxes on your behalf and adding that amount to your mortgage balance. Municipalities also have their own collection process that can escalate to a tax sale in extreme circumstances. Staying current on property taxes is a basic obligation that should be tracked whether or not your lender collects them on your behalf.