There was an article by Micheal Kane in the Vancouver Sun on January 27th that started with the following words:
"Imagine borrowing at two percentage points below prime, at simple rather than compound interest, and not having to make any payments until you sell your home or pass away, whichever comes first. It’s the best taxpayer-supported deal in British Columbia, and it is being grabbed by both the needy and the greedy.”
The article is describing the BC Property Tax Deferment that started in 1974 to make sure that homeowners with low income would not be forced to sell their homes to pay their property taxes, just because their homes had appreciated in value.
Currently more than 12,000 households in British Columbia defer property taxes. In total there is about $173 million owing to the provincial government. In Nanaimo 296 residents deferred over $600,000 last year, $2,000 each on average. West Vancouver heads the list with 941 homeowners who deferred over $4 million last year, just over $4,000 each on average. Five other municipalities in the province deferred more than $1 million each; Vancouver, North Vancouver, Saanich, Surrey and Delta.
The program is becoming more popular with the increase in the price of homes, property taxes and the aging population. There was a 50% increase in applications last year.
And it is not just the low-income seniors who are applying. Many baby boomers who can afford to pay their property taxes are analyzing the situation and realizing it is a good investment NOT to pay this tax but to defer it against the increased value in their homes.
In order to apply, you or your spouse must be 60, you must be a Canadian or permanent resident and you have to have lived in BC for at least one year. Someone who is a surviving spouse or disabled (see the definitions) can apply even if they are not yet 60. More information can be obtained at
www.rev.gov.bc.ca/rpt/property_tax_deferment.htm, or at City Hall.
The interest rate is set every six months, October and April at not greater than 2% below the rate at which the province borrows money. It is currently 2.25% and will probably increase in April, but it is still a good deal. There is also a $60 set-up charge and an annual renewal fee of $10 on which no interest is charged, they just accrue.
Personally, I plan to take advantage of this program just as soon as I can – I’m not sure if I am "needy” or "greedy”. But where else can I borrow money at 2.25%? The value in my home doubled in the past two years alone, so there is already enough equity.
Chris and I also plan to "retire” when we hit 60. We will take a two month vacation, apply for our CPP which will be reduced by 30% on what it would be at 65, but we’ll be saving almost that much by deferring our property taxes!! Then we will "unretire”. I like what I do far too much to stop at 60 or 65. I’m working on Freedom 85!!
Gill Campbell is a certified financial planner and an independent insurance broker. Please email her with specific areas that you would like her to consider in developing future columns