Property tax loans are cost-saving alternatives for many Texas home, commercial and rental property owners, and can halt the tax assessor's collection process and prevent foreclosure. There are some instances, however, when this type of past-due tax financing isn't the ideal option. We've put together some examples of circumstances when a property owner shouldn't get a property tax loan:
- You're over age 65 or disabled, and the property is your homestead. If so, you don't need a property tax loan because you can qualify for a tax deferral by completing the appropriate forms with your local tax assessor. Once the deferral is approved, the tax assessor's collection and foreclosure process stops, although interest continues to accrue at 8 percent annually. If you sell or move out of your home, any amount you owe the taxing authority becomes due and payable. If you pass on, your heirs must pay the entire outstanding balance within 180 days.
- You owe less than $2,000 in taxes, and you expect to pay off the balance before July 1st. Assessed property taxes must be paid by January 31st, and beginning on February 1st, your tax assessor starts charging interest and penalties on any amount you still owe. Through June 1st, these charges will total 15 percent, which would add $300 to a $2,000 tax bill. The fees and costs associated with property tax loans are likely higher than $300, so taking out a loan for this short of a term wouldn't save you money. If you know you can't pay off the delinquent taxes by July 1st, a property tax loan will provide some savings, because that's when the tax assessor's attorneys add their 20 percent collection fee to past-due accounts and the tax assessor tacks on another 3% penalty. What started as a $2,000 tax bill can increase to $2,832 by July 1st.
- Your tax assessor offers an payment plans. If you have the cash on hand to pay 25 to 50 percent of the balance right away, and can budget for heftier monthly payments, you don't need to apply for a property tax loan. Depending on the terms offered by your local tax assessor, you may have to repay the entire amount owed within 12 months, and you'll need to factor in that interest and penalties continue to mount during this period.