Property Tax Funding Blog

Do I qualify for a Property Tax Loan?

PROPERTY TAX LOAN QUESTIONS & ANSWERS

Property taxes can pile up quickly if not paid on time.  The penalties and interest fees charged by the tax assessor can increase your tax bill by up to 48% in the 1^st year alone if left unpaid.  If you are approaching your property tax payment deadline, it might be time to consider a property tax loan.  Below is a list of important questions and answers you should know when determining if a tax loan is right for you. 

What many property owners are not aware of is just how large the July 1st delinquent property tax penalty actually is.  Under section 33.07 of the Texas Property Tax Code, delinquent taxes not paid prior to July 1st are subject to an additional penalty of up to 20%.  This 20% penalty is on top of the up to 3% penalty and interest charged by the tax assessor, resulting in additional penalties of 23% on July 1st. 

NEW LAWS FOR PROPERTY TAX LOANS & LENDING

On May 29, 2013 Governor Rick Perry signed into law SB 247, which imposed new rules and regulations for property tax lenders.  This legislation was enacted, despite a favorable report released August 2012 from the Texas Finance Commission in which the commission made no additional legislative recommendations for laws governing property tax lending.  The study also specifically suggested that market forces and sensible regulation appear to have driven down the interest rates and closing costs of property tax loans.

With property taxes continuing to increase each year in Texas, many property owners are finding themselves struggling to pay the bill on time.  Homeowners may face unexpected expenses from year to year, like medical bills or home repairs, that can make the property tax bill a burden they simply cannot meet.  Financial changes in a difficult year, such as a divorce or loss of a job, can make property taxes an overlooked expense.  Many professionals and business owners cannot afford to tie up a lump sum of their operating capital by making a large property tax payment all at once.  Sometimes people inherit property from the estate of a relative and simply have not budgeted for the tax bill – or they may inherit a backlog of unpaid property taxes along with the land itself. 

Texas Property Owner's Tax Bills Continue to Increase

Property owners in Texas are facing higher property taxes again in 2013, thanks to higher property values and the continued increase in tax collecting entities such as special purpose districts.  According to the Texas Comptroller of Public Accounts, more than 500 new special purpose districts have been created since 1992, which accounts for 87% of the growth in local entities that levy property tax.  The revenue generated by these special purpose taxes are often assessed to pay for infrastructure or to fund services in unincorporated or developing areas.  The most common special purpose districts are municipal utilities districts, emergency services districts and hospital districts.  Coupled with recovering real estate values and rising home prices that will certainly raise property value assessments, Texas property taxes are likely to continue the rising trend in the years to come. 

Senate Bill 762, an act of the 82nd Texas legislature, Regular Session, 2011, required the Finance commission to complete a study of the Texas property tax lending industry.  The study was set forth to examine the fees, costs, and charges to borrowers who obtained a property tax loan.   The property tax lending study report was prepared by the Office of Consumer Credit Commissioner (OCCC) and approved by the Texas Finance Committee in August of 2012.  

Imagine a world where you actually own your home or place of business.  If you believe we live in that reality today, you are sorely mistaken.  That's because under Texas' current property tax system, every property owner pays an annual property tax.  If that tax goes unpaid, the taxing jurisdiction has the authority to seize your property.  Under this taxing system you never really own your property, since annual property taxes are like “rents” due each year and failure to pay can result in foreclosure or “eviction” from your property.

With the passage of the Property Tax Lender License Act (Texas Senate Bill 1520), which took effect September 1, 2007, the property tax lending industry has seen steady demand from Texas property owners.  The establishment of a licensing procedure and regulatory framework for property tax lenders has led to significant growth in the number of property tax loan companies.  Despite the growth in lenders the number of new tax loans originated remained relatively flat from calendar year 2010 and 2011 with 12,951 and 12,731 new loans originated, respectively.      

If you have a looming or delinquent property tax bill and are short on cash then please understand – you are not alone.  You are one of tens of thousands of Texas property owners in need of property tax help in this tough economy.  The question is – why haven’t you taken action to solve your tax problem?  Some of the reasons our clients give us for ignoring the problem are “I didn’t believe I could get approved for a loan.” Or “I am very busy and getting a loan takes too much time.” Or “I was embarrassed and hoped the problem would go away.”