Can my mortgage company step in and pay my delinquent property taxes?
Yes, your mortgage company can pay your delinquent property taxes without your authorization. Lenders expect borrowers who do not have escrow account to pay their property taxes when due. When property taxes become delinquent, the lender’s security interest in the property may be at risk, and the lender may step in and pay these delinquent amounts to protect their lien priority. Once paid, the lender may then establish an escrow account to be repaid and to accumulate funds for future payment of property taxes. In some cases, this can more than double an individual’s mortgage payment.
To illustrate, here are two very typical stories we discovered via a quick Google search:
“The mortgage company paid the delinquent taxes and have now raised my mortgage payment from $882 to $1,674!”
My lender paid my property taxes without my permission… “result: my payment has gone up 300%, they are attempting to collect the tax they paid as well as penalties for the past year and next year.”
Unfortunately these stories are not rare. In fact we sometimes have mortgage companies step in while we are processing an application for a client. When this happens we are often asked by the client if there is anything we can do to help as their new mortgage payments are more than they can afford, but unfortunately once the mortgage company has paid the taxes, there isn’t anything we can do.
How does getting a property tax loan help?
If your mortgage company is threatening to pay your delinquent property tax bill, getting a property tax loan can help because it can prevent your mortgage company from paying your past due taxes without your permission. Once your property tax loan is funded, the only way your mortgage company can pay off your tax lender is: 1) with your permission, 2) if you are 90 days delinquent with your mortgage company, or 3) if you are 90 days delinquent with your property tax lender. Your lender may not approve of a property tax loan, but keep in mind, when you are delinquent on your property taxes you are already in violation of your Deed of Trust with them and are susceptible to a drastic increase in your mortgage payment if you do nothing. Taking out a property tax loan can give you the edge to negotiate better terms with your mortgage company for repayment of these delinquent taxes should you choose to give them permission to pay off your tax lender. As you can see, in this situation a property tax loan can be a useful tool to help ensure your monthly payment doesn’t skyrocket with your lender.
For more information, please contact a property tax loan officer to discuss your options and to learn more.