Delinquent property taxes

We'll pay your late property taxes now

Most Texans don’t know that property tax loans are a viable option for paying delinquent property taxes. For many, they can be the best option. However, there are a number of things a prospective  borrower should know. This article identifies the  five most important.

Here are the top 5 things you must know before getting a property tax loan:

  1. Definition of a property tax loan.

  2. A property tax loan  is made  for  the  purpose  of  paying  your property  taxes  to  save  you  (the  property  owner) money and/or to prevent the taxing unit (county, school district, etc.) from foreclosing on your property for unpaid taxes. The way it works is that a tax lender pays your (the borrower’s) property taxes directly to the taxing unit and then gives you a payment plan to pay them back.  The taxing unit has a lien against your property, and they transfer that lien to the tax lender when the tax lender pays your taxes. The tax lien is the tax lender’s security for payment and is released after you have paid off your loan.

  3. Who should not get a property tax loan.

  4. If you are disabled or age 65 or older, and the property that you owe taxes on is your homestead, you should not get a property tax loan. Instead, you should go to the county Tax Assessor’s office, and get what is known as a “deferral” of your tax bill.  You are entitled to tax deferral under Texas Tax Code, § 33.06. With deferral status, you can stop paying property taxes and the taxing unit cannot foreclose on your property.  Also, the penalties that are charged to your tax account will be reduced substantially.   But, the taxes do not go away.   They are “deferred” or postponed until you move off the property or expire. If that happens, you or your heirs will have 180 days to pay the tax bill.   If your taxes are deferred, you should still try to pay what you can on your tax bill, but a deferment will keep the taxing unit from foreclosing on your property, even if you are unable to make another payment.

  5. A property tax loan can save you money OR help you avoid foreclosure.

  6. Taxing units (such as your county or school district) will charge you a substantial amount in penalties and interest if you do not pay your taxes on time.  In fact, in most counties, if you do not pay your property taxes by the payment deadline, the combination of penalties, interest and fees are often as high as 47% in most counties the first year.   You could make an agreement with the county for the repayment of your delinquent taxes in installments; however, you will still be charged penalties and interest on the unpaid balance.  Additionally,  most  counties  only  want to make short term loans so they will want a large down payment and high monthly payments.  Still though, if you owe less than about $2,000 in taxes, it is probably more economical to just pay the county or school district as soon as you are able to pay them (even though you will accrue penalties and interest on your unpaid balance). Property tax loans are only beneficial if you owe more than $2,000 in taxes. Then, a property tax lender will pay your property taxes, and all penalties, interest, and fees will stop accruing. Your property tax lender should provide you with a Good Faith Estimate that sets out exactly what the tax loan payments will be and will show you what the loan will cost you over the life of the loan. A property tax loan will stop the foreclosure by the taxing unit as long as you get the loan completed before the Tax Collector holds the foreclosure sale.

  7. All property tax lenders are not the same.

  8. Some property tax lenders sell your tax loan or loan servicing rights to out of state companies.  Some property tax lenders will have their loans serviced by companies whose only concern is collecting the loan and who don’t expect a long term relationship. This means that the company collecting your loan payments may be someone that you have never even met or talked to before.  You have the right to know before you make the property tax loan whether you will be doing business in the future with the company making your loan or with some call center on the east coast or in India.  Avoid entering into a property tax loan if your loan will be serviced by someone other than who you are getting the original tax loan from.

  9. A property tax loan should be one of the easiest loans you will ever get.

  10. The application process of a property tax loan is typically easier than most loans and involves less paperwork, so it can usually be closed within 7-10 days of the application. And, most property tax lenders do not require a credit check, so the tax loan will not have an impact on your credit score (like most other types of credit). The best part is that your property tax lender should be able to roll all of your closing costs into the loan so that you don’t have to pay any out-of-pocket expenses to get the loan.  The closing costs are capped by Texas law so you should be sure that you are not paying more in closing costs than the law allows.

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About the Author:  Charles E. Brown is founder and President of Hunter-Kelsey. Mr. Brown is a Director of the Texas Property Tax Lienholders Association and holds a NMLS license.  He has 25 years experience as a Texas real estate attorney and is Board Certified by the Texas Board of Legal Specialization in Commercial and Residential Real Estate law. Feel free to direct comments or questions to Mr. Brown at cb@hunterkelsey.com.