DEFER YOUR TAXES? THINK AGAIN!

 

The Tax Deferral Loan: A Quiet Thief of Home Equity

A tax deferral loan might sound helpful—skip your property taxes now, pay them later. But here’s the truth: it’s a loan, not free money, and it comes with a cost. That cost is interest that eats away your home equity.

Each year you defer, you pay interest. And that interest compounds—meaning you pay interest on top of interest. A $5,000 tax deferral at 4% interest grows every year. After 10 years of deferring $5,000 annually, you’ll owe over $61,000 instead of just $50,000. That’s $11,000 lost to interest.

When you sell your home, the city collects what you owe first—your taxes and the interest. That’s money taken from your home’s value, gone before you see a cent.

The Bottom Line

Tax deferral loans help you today, but they steal from your future. Think twice before deferring—protect your home equity.

Note: I have now learned that BC does not compound the interest on deferred taxes, but rather charges simple interest instead. That would reduce the final amount owing by about $1,000.00.

It needs to be remembered these deferrals are just that, deferrals and must be paid back when you or your estate sells your home.

We have to ask ourselves what kind of society have we created that in order to pay taxes on your home you now have to borrow the money.