How is property tax calculated?

Your property's assessed value is multiplied by your municipality's tax rate. Both the assessment and the rate are set locally, so amounts vary considerably between cities and provinces.

Can I pay property tax through my mortgage?

Many lenders offer to collect property tax as part of your mortgage payment and remit it to the municipality for you. Others require you to pay the city directly. It is worth confirming the arrangement with your lender.

Does property tax affect how much I can borrow?

Yes. Lenders include property tax in your GDS and TDS ratios, so a higher tax bill increases your housing costs and can reduce the maximum mortgage you qualify for.

Mortgage Glossary

What is Property Tax?

Property tax is an annual tax that municipalities charge owners of real estate to fund local services like schools, roads, policing, and waste collection. The amount is based on your property's assessed value multiplied by a local tax rate. It is a recurring ownership cost, separate from your mortgage, and lenders include it when assessing affordability.

Find my best mortgage Back to glossary

Quick answer

Also known as: municipal tax, realty tax

Key points

An annual municipal tax based on your property's assessed value and the local rate.
Funds local services such as schools, roads, and emergency services.
Rates and assessments vary widely by municipality and province.
Often paid through your mortgage payment, or directly to the municipality.
Counts toward your GDS and TDS ratios in mortgage qualification.

Property Tax explained

Property tax is levied yearly by your local government on the assessed value of your home and land. A provincial or regional body assesses your property's value, and the municipality sets a tax rate (the mill rate) that, applied to that value, produces your tax bill. Rates and assessment methods vary by municipality and province, so two similar homes in different cities can owe very different amounts.

Property tax is an ongoing cost of ownership that does not go away once the mortgage is paid off. Many lenders let you pay it through your mortgage by adding an instalment to each payment and remitting it on your behalf, while others leave you to pay the municipality directly. Either way, lenders count property tax in your debt-service ratios when deciding how much you can borrow.

What a Property Tax is for

Property tax funds the municipal services that keep a community running, from schools and libraries to fire protection, snow clearing, and local infrastructure. For lenders, it is a mandatory carrying cost that affects whether you can afford a home, which is why it is built into the GDS and TDS ratio calculations used in mortgage approval.

How it can help you

Factoring property tax into your budget gives you a true picture of monthly home ownership costs, not just the mortgage payment. Knowing the rate before you buy helps you compare neighbourhoods and avoid stretching your budget. Because property tax counts toward your debt-service ratios, a high tax bill can reduce how much mortgage you qualify for; Lenderoo lets you compare lenders across 40+ options for free so you can find the best fit once your full carrying costs are accounted for.

When it comes up

A buyer comparing two homes at the same price finds one sits in a municipality with a noticeably higher tax rate. The extra annual tax raises their monthly carrying cost and trims their borrowing power through the TDS ratio. Recognizing this, they factor the tax difference into which home they can comfortably afford.

Example: estimating an annual property tax bill

Imagine a home assessed at $500,000 in a municipality with a tax rate of about 1%. The annual property tax would be roughly $5,000, or about $417 per month.

If your lender collects tax with your mortgage, that $417 is added to each monthly payment and remitted to the city on your behalf. It also counts toward your GDS ratio, so a higher tax bill directly reduces the mortgage amount you can qualify for, even though it is not part of the loan itself.

Have a question about property tax?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Property Tax: frequently asked questions

Common questions Canadians ask about property tax.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.