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Property Tax Funding Blog

When to NOT get a Property Tax Loan

Posted by Matt Longhofer on Fri, Apr 01, 2011 @ 09:04 AM

Over the past year, I’ve written more than a few blogs about the benefits of property tax loans.  Typically a property tax loan is a great option when compared to the exorbitant 44% 1st year penalties charged by the tax assessors.   Despite the benefits that tax loans offer property owners, there are in fact certain situations that do not justify a tax loan.  We frequently speak to property owners and educate them that a tax loan may not be their best option.  Don’t get me wrong, we are in the tax loan business; however, running a good business is more than just about doing all the loans you can.  Our approach is to understand the situation and recommend the best course of action for the property owner.   I’ve listed a few common situations when we would not recommend a property tax loan. 

These are:no property tax loans

1)      Property owner is over 65 and/or disabled and the property is your homestead.  When this situation exists we recommend the property owner secure a property tax deferral from their appraisal district.  A tax deferral places all taxes in a deferred status with a maximum annual interest rate of 8%, which is lower than anything you’ll receive on a property tax loan.  Additionally, no penalties will be applied to the account other than the stated interest rate.  For more information see our blog article on this subject.

2)      Tax amount due is less than $2,500.  If your tax amount due is less than $2,500, we tend to discourage securing a tax loan.  While the tax penalties are significant in percentage, you should also consider the actual real dollar impact.  A $2,500 tax bill due in January would accumulate $375 in penalties from the tax assessor during the 1st 5 months of delinquency (Feb – June).  What you’ll find is that all tax lenders have closing costs, and even those in the low range are much greater than penalties you would incur during the 1st 5 months of delinquency.  If you cannot pay your taxes completely by July 1st, then benefits of a property tax loan become more compelling as the July 1st penalty can be up to 23%. 

3)      You have access to low cost financing.   Go to your bank and ask about personal loans. If you have a good credit history and a good record of on-time payments, you may be able to get a loan from your bank.  Another source of low cost financing can be a loan from friends or family.  It’s likely the cost of financing your taxes through one of these sources will be lower than that offered by a property tax lender.     

I realize every situation is unique when it comes to dealing with a property tax problem.  I would encourage anyone with unpaid property taxes to begin now by examining their options and the costs and benefits associated with each alternative.  If you’d like a free consultation about your specific situation, please give us a call at 877-776-7391.  We promise a low pressure consultation to help you understand your best option. 


Topics: Property Tax Loan, tax loans in Texas

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