Reverse Mortgage to Pay Property Tax Arrears in Ontario

"The municipality just sent me a final notice — if I don't pay $14,000 in back taxes by next month, they're putting my home up for tax sale. What can I do?" For Ontario seniors living on fixed incomes, falling behind on property taxes can snowball into a crisis faster than most people realize. The good news: if you own your home and are 55 or older, a reverse mortgage to pay property tax arrears in Ontario may resolve the problem entirely — clearing the debt, stopping penalties, and protecting your home from tax sale without requiring a single monthly payment.

This article is for educational purposes only and does not constitute financial advice.

How Property Tax Arrears Escalate in Ontario

Property tax arrears are among the most dangerous debts an Ontario homeowner can carry. Unlike credit card debt or utility bills, unpaid property taxes give the municipality a legal claim on your home — and Ontario law provides a clear, enforceable path to seize and sell the property.

Here is how the Ontario property tax collection process typically unfolds:

Stage	Timeline	What Happens
Missed payment	Day 1	Interest and penalties begin accruing (typically 1.25% per month, or 15% annually)
Arrears notice	30–90 days	Municipality sends written notice of overdue amount
Tax arrears certificate	After taxes unpaid for 2+ years	Municipality registers a tax arrears certificate against your property title
Cancellation price notice	1 year after certificate	You receive formal notice of the cancellation price (full arrears + costs + interest)
Tax sale	1 year after cancellation notice	Municipality can sell the property to recover unpaid taxes

According to the Ontario Ministry of Municipal Affairs and Housing, municipalities across the province registered tax arrears certificates against approximately 12,000 properties in recent years. While not all proceed to tax sale, the legal process is real and enforceable.

The penalty interest alone — typically 1.25% per month — means a $10,000 property tax debt grows to $11,500 in just one year. After two years, the amount including penalties can exceed $13,200 before the municipality adds legal and administrative fees on top.

Why Seniors Are Disproportionately Affected

Ontario seniors face a unique squeeze: property values (and therefore property tax assessments) have risen dramatically over the past decade, while retirement incomes have remained relatively flat. A homeowner in Mississauga whose property was assessed at $450,000 in 2015 may now face assessments based on a value of $900,000 or more — with property taxes that have increased accordingly.

Ontario Municipality	Average Property Tax (2025)	10-Year Increase
Toronto	$4,600–$5,800	+38%
Ottawa	$5,200–$6,400	+42%
Mississauga	$5,000–$6,100	+35%
Hamilton	$5,400–$6,600	+45%
London	$4,800–$5,900	+40%
Barrie	$4,900–$6,000	+44%

For a senior receiving $1,800/month from CPP and OAS combined, a $5,500 annual property tax bill represents over 25% of total income. When unexpected expenses arise — a furnace replacement, medical costs, a spouse's passing — property taxes are often the bill that gets deferred.

Understanding your property tax and insurance obligations under a reverse mortgage is critical. We cover this in detail in our property taxes and insurance obligations guide.

How a Reverse Mortgage Resolves Property Tax Arrears

A reverse mortgage allows you to convert a portion of your home equity into tax-free cash — without monthly payments. When used to clear property tax arrears, the process works as follows:

1. You contact Rick Sekhon, a licensed Ontario mortgage broker, to discuss your situation and confirm basic eligibility. To qualify, you must be 55+ and own your home. For full eligibility details, see our eligibility guide.
2. A home appraisal is ordered to determine the current market value. The lender uses this to calculate the maximum amount you can borrow (typically 25%–59% of home value, depending on age).
3. The lender approves a reverse mortgage. You can request enough to cover the full tax arrears, plus penalties, plus upcoming tax installments to create a buffer.
4. Funds are advanced to pay the municipality directly (or deposited to your account for you to make the payment). The tax arrears certificate, if registered, is cleared from your property title.
5. No monthly payments are required. Interest on the reverse mortgage compounds on the balance and is repaid when the home is sold or you move out.

The reverse mortgage proceeds are not taxable income — they are a loan secured by your home. The CRA (Canada Revenue Agency) does not count them as income, so your OAS, GIS, and any other income-tested benefits remain unaffected. Learn more in our tax implications guide.

Real-World Scenario: Gerald and Diane, 72 and 69, Hamilton

Gerald and Diane own a Hamilton home appraised at $620,000 with no existing mortgage. They fell behind on property taxes during a period when Gerald had health issues, accumulating $18,500 in arrears and penalties over two years. Their municipality registered a tax arrears certificate.

Item	Amount
Property tax arrears (2 years)	$14,200
Penalty interest (1.25%/month)	$3,400
Municipal legal/admin fees	$900
Total owed to municipality	$18,500
Reverse mortgage amount requested	$30,000
Amount to clear arrears	$18,500
Buffer for next 2 years of property taxes	$11,500
Monthly payment required	$0

By requesting $30,000 through a CHIP reverse mortgage from HomeEquity Bank, Gerald and Diane clear the entire arrears balance, remove the tax arrears certificate from their property title, and pre-fund the next two years of property taxes. Their home equity decreases from $620,000 to $590,000 — a modest reduction that eliminates the threat of losing their home entirely.

Rick Sekhon notes: "Property tax arrears are one of the most urgent situations I help seniors resolve. The tax sale process in Ontario is real, and once a certificate is registered, the clock is ticking. A reverse mortgage can stop the process and give homeowners breathing room — usually within 4 to 6 weeks from application to funding."

Comparing Options for Paying Property Tax Arrears

A reverse mortgage is not the only option for addressing property tax arrears, but it has distinct advantages over alternatives — particularly for seniors on fixed incomes.

Option	Monthly Payment Required	Income Qualification	Preserves Home	Speed
Reverse mortgage	No	No	Yes	4–6 weeks
HELOC	Yes	Yes	Yes (if payments maintained)	2–4 weeks
Personal loan	Yes	Yes	Yes (if payments maintained)	1–2 weeks
Municipal tax deferral program	Varies	Varies by municipality	Yes	Application dependent
Family loan	Depends on arrangement	No	Yes	Immediate
Selling the home	N/A	No	No	2–6 months

Municipal Property Tax Deferral Programs

Some Ontario municipalities offer tax deferral or relief programs for low-income seniors. For example, the City of Toronto's Property Tax Increase Cancellation Program caps tax increases for eligible seniors and people with disabilities. However, these programs:

• Only defer future increases, not existing arrears in most cases
• Have strict income thresholds (often below $50,000 household income)
• Require annual application and proof of eligibility
• Do not remove existing tax arrears certificates

According to the Financial Consumer Agency of Canada (FCAC), seniors exploring options for paying overdue property taxes should compare the total cost of borrowing across all available options before making a decision. A reverse mortgage may carry a higher interest rate than a HELOC, but the absence of required monthly payments eliminates the risk of falling behind again.

For seniors also carrying credit card or other consumer debt alongside property tax arrears, a reverse mortgage can address everything at once. See our debt consolidation guide for complete details.

What Lenders Are Available?

Ontario homeowners have several reverse mortgage lenders to choose from:

• CHIP by HomeEquity Bank — Canada's largest reverse mortgage provider, offering both lump sum and line of credit options. CHIP products include a no-negative-equity guarantee, meaning you will never owe more than your home's fair market value. For more on this protection, see our inheritance guide.
• Equitable Bank PATH Home Plan — Offers competitive rates and flexible draw options. Equitable Bank is a federally regulated Schedule I bank.
• Bloom Financial — A newer entrant offering flexible terms and competitive pricing for qualifying properties.

Rick Sekhon works with all major reverse mortgage lenders and can compare offers to find the best rate and terms for your specific property tax situation. His service is free to borrowers — lenders pay the broker fee.

The Ongoing Property Tax Obligation

It is critical to understand that while a reverse mortgage can clear existing property tax arrears, you must continue to pay future property taxes on time as a condition of the reverse mortgage agreement. Failure to maintain property taxes is one of the few situations where a reverse mortgage lender can require repayment of the loan.

FSRAO (Financial Services Regulatory Authority of Ontario) requires that all mortgage professionals clearly disclose this obligation before closing. Rick Sekhon helps clients set up systems — such as automatic tax installment plans or reserving a portion of reverse mortgage funds for future taxes — to prevent the problem from recurring.

Strategies for staying current on property taxes after a reverse mortgage:

• Request extra funds. Borrow enough to cover 2–3 years of future property taxes and set the money aside in a dedicated account.
• Enroll in the municipal pre-authorized payment plan. Spreading taxes over 10–12 monthly installments is easier to manage than large lump-sum bills.
• Use the reverse mortgage line of credit. Instead of taking a lump sum, keep a credit facility open and draw from it annually when taxes come due.
• Apply for available municipal senior tax relief programs to reduce the annual amount owed.

For seniors looking to age in place safely, keeping property taxes current is a non-negotiable requirement — and a reverse mortgage provides the financial foundation to make it possible.

How Quickly Can a Reverse Mortgage Stop a Tax Sale?

Timing is often the most critical factor. Here is a realistic timeline for using a reverse mortgage to address property tax arrears before a tax sale:

Step	Typical Timeline
Initial consultation with Rick Sekhon	Day 1
Application submitted to lender	Days 2–3
Home appraisal ordered and completed	Days 5–14
Lender review and approval	Days 14–21
Independent legal advice (required in Ontario)	Days 21–28
Closing and funding	Days 28–42
Payment to municipality	Days 29–43

Total: approximately 4–6 weeks from first call to tax arrears cleared.

If a tax sale is imminent (within 30 days), Rick Sekhon can request expedited processing from the lender. In urgent cases, some lenders can close within 3 weeks. However, starting early is always preferable — if you have received a tax arrears certificate, do not wait for the final notice.

Managing Debt Beyond Property Taxes

Property tax arrears rarely exist in isolation. Many seniors who fall behind on property taxes are also dealing with credit card debt, utility arrears, or other obligations. A reverse mortgage can address all of these at once, providing comprehensive debt relief for Ontario seniors.

If you are facing multiple debts and considering your options, our guide to using a reverse mortgage for credit card debt provides additional scenarios and cost comparisons.

Frequently Asked Questions

Can I get a reverse mortgage if my property taxes are already in arrears?

Yes. Reverse mortgage lenders in Canada will approve applications even when property taxes are overdue, provided the total amount needed (including arrears, penalties, and setup costs) falls within the approved borrowing limit. The lender typically requires that arrears be cleared directly from the reverse mortgage proceeds at closing.

Will paying my tax arrears with a reverse mortgage remove the tax arrears certificate?

Yes. Once the municipality receives full payment of all arrears, penalties, and fees, the tax arrears certificate is discharged from your property title. This stops the tax sale process entirely.

What if I only need a small amount to cover my tax arrears?

Reverse mortgage lenders typically have minimum advance requirements — usually $25,000 to $50,000. If your tax arrears are less than this, the remaining funds can be used for other purposes (future taxes, home repairs, living expenses) or held in your bank account as a reserve.

Does a reverse mortgage affect my OAS or GIS benefits?

No. Reverse mortgage proceeds are a loan, not income. The CRA does not include them in your income calculation, so your OAS, GIS, and other income-tested benefits are not affected.

What interest rate will I pay on the reverse mortgage?

Current reverse mortgage rates in Ontario range from approximately 6.54% to 7.99%, depending on the lender, term, and whether you choose a fixed or variable rate. These rates are higher than a standard HELOC but significantly lower than the 15% penalty rate most municipalities charge on tax arrears. For detailed rate comparisons, see our 2026 rate guide.

Can the municipality still sell my home if I have a reverse mortgage?

Once your property tax arrears are fully paid, the municipality has no grounds for a tax sale. However, if you fail to pay future property taxes after obtaining a reverse mortgage, the municipal tax collection process could begin again. This is why setting up a plan for ongoing tax payments is essential.

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Property tax arrears put your home at genuine risk, but for Ontario seniors with substantial home equity, a reverse mortgage offers a clear path to resolution — clearing the debt, stopping the tax sale process, and providing a buffer for future obligations, all without monthly payments.

Get your free Ontario Reverse Mortgage Guide →