Property Taxes and Home Insurance: The Complete Financial Picture

"With a reverse mortgage, who pays the property taxes?" You do. And this is the detail that catches many Ontario homeowners off-guard. While a reverse mortgage eliminates monthly mortgage payments, you still have property taxes, home insurance, and maintenance costs to cover — and they're YOUR responsibility, not the lender's.

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

Understanding these ongoing costs is critical to determining whether a reverse mortgage makes sense for your retirement budget.

Property Taxes: The Ongoing Obligation

Property taxes are your largest ongoing expense. In Ontario, property tax rates vary significantly by municipality:

Municipality	Average Annual Tax (for $650,000 home)
Toronto	$5,500–$6,500
Ottawa	$4,200–$4,800
Hamilton	$3,800–$4,400
London	$3,500–$4,100
Rural Ontario	$2,500–$3,500

You pay property taxes directly to your municipality, not through the lender. The lender has no involvement. If you don't pay, the municipality can place a lien on your home — and if taxes go unpaid for years, the municipality may seize and sell your property.

Property Tax Deferrals in Ontario

If property taxes are a strain, Ontario offers tax deferral programs for seniors:

✓ Property Tax Deferral Program — Defer taxes until your home is sold or you pass away ✓ Age Eligibility — Age 65+ (if living alone) or 55+ (if receiving income assistance) ✓ Income Limits — Must be modest (typically under $65,000 annually) ✓ Repayment — Taxes + interest are repaid when the home is sold

A reverse mortgage doesn't affect your eligibility for tax deferrals. Many Ontario seniors use BOTH strategies: a reverse mortgage for spending power NOW and a tax deferral to reduce immediate property tax burden.

Home Insurance Requirements

Your reverse mortgage lender REQUIRES that you maintain comprehensive home insurance throughout the life of the loan. This is NOT optional.

What Your Insurance Must Cover

Your policy must include:

✓ Building/structure coverage — Rebuilding costs for the house ✓ Contents coverage — Replacement value of belongings (optional but recommended) ✓ Liability protection — If someone is injured on your property ✓ Minimum coverage value — Typically equal to 100% of the home's rebuilding cost

Your lender will be named as a "loss payee," meaning insurance proceeds go partly to repay the loan if there's major damage.

Average Home Insurance Costs in Ontario

Coverage Type	Annual Premium (April 2026)
Basic Building + Liability	$1,200–$1,800
Comprehensive (Contents Included)	$1,800–$2,600
Premium homes ($800k+)	$2,500–$4,000+

Insurance costs vary based on:

• Age and construction quality of the home
• Location and crime rate
• Previous claims
• Coverage limits you select

According to FCAC, homeowners often underestimate insurance costs and may face a shock during the renewal process when rates increase.

Property Maintenance: Your Responsibility

The lender requires that you maintain the property in "good condition." This means:

✓ Roof repairs (typically every 20–25 years) ✓ Furnace/heating system maintenance and replacement ✓ Plumbing and electrical repairs ✓ Foundation repairs if needed ✓ Driveway and external structure maintenance ✓ Landscaping and yard maintenance (general appearance)

What happens if you don't maintain the property? The lender can conduct property inspections. Significant disrepair may trigger the lender to:

• Require repairs before drawing more funds
• In extreme cases, call the loan due if the property condition threatens the equity value

This is standard for ANY mortgage — it's not a reverse mortgage-specific issue.

Estimating Your Total Annual Costs

Here's a realistic example for a $650,000 Ontario home:

Cost Category	Annual Amount
Property Taxes (Toronto)	$6,000
Home Insurance (comprehensive)	$2,000
Utilities (heating, water, electric)	$2,500
Maintenance Reserve (roof, furnace, etc.)	$2,000
Total Estimated Annual Cost	$12,500

This doesn't include mortgage payments (because you don't have any with a reverse mortgage), but it includes everything else homeowners must pay.

Monthly equivalent: $12,500 ÷ 12 = ~$1,042/month in basic holding costs.

Tax Deductions for Homeowners

Good news: Some home-related costs are tax-deductible if you rent out part of your home or use part of it for business.

Bad news: If your home is purely personal (no rental income, no business use), you CANNOT deduct:

• Property taxes (personal use)
• Home insurance (personal use)
• Mortgage interest (personal use — though this changes if you refinance)
• Utilities (personal use)
• Maintenance costs (personal use)

According to the CRA, primary residence property expenses are generally not tax-deductible. Only interest on investment properties qualifies.

Planning for Rising Costs

Property taxes and insurance don't stay flat. Budget for annual increases:

Property taxes typically rise 2–3% annually in most Ontario municipalities.

Home insurance often increases 5–10% annually due to claims history, inflation, and risk factors.

Maintenance needs vary, but setting aside 1–2% of your home's value annually for reserves is prudent planning.

Frequently Asked Questions

Can I use reverse mortgage funds to pay property taxes?

Yes. Any funds you receive can be used for any purpose, including property taxes. However, this means your loan balance grows while your equity declines.

What if I can't afford my property taxes anymore?

Contact your municipality immediately about tax deferral programs (Ontario residents 65+). You can also downsize to a less expensive property or explore a Home Equity Line of Credit (HELOC) instead of a reverse mortgage.

Does the lender collect property taxes like a traditional mortgage does?

No. With a reverse mortgage, YOU pay taxes directly to the municipality. The lender has no involvement. This is different from traditional mortgages where the lender often collects taxes in an escrow account.

What if property taxes increase dramatically?

Property tax increases are set by your municipality's council. You can appeal your home's assessed value if you believe it's too high, but increases are beyond your control. This is why budgeting for annual increases is important.

Are condos subject to special assessments in addition to property taxes?

Yes. Condos have additional "condo fees" and may have special assessments for major building repairs. These costs are separate from property taxes and can be significant.

Speak to a licensed mortgage professional. Independent legal advice is required before closing a reverse mortgage in Ontario.

Before getting a reverse mortgage, calculate your true cost of homeownership — including taxes, insurance, and maintenance. This complete picture helps you determine whether a reverse mortgage fits your retirement budget.

Get your free Ontario Reverse Mortgage Guide →

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This content is for illustrative purposes only. Rates may vary. Call Rick Sekhon for the best rates and more information.