Are you behind on your Texas property taxes and wondering how you'll pay what you owe?
If so, you might be considering a county installment plan or a property tax loan. Both options let you pay what you owe over time. But they take slightly different approaches.
County installment plans require monthly payments to your tax office while interest continues to accrue. Conversely, with a property tax loan, a licensed lender pays the amount due on your outstanding taxes, and you repay the lender under the terms of your financing agreement.
So, which option makes the most sense for you? It really depends on how much you owe, how long you need to repay it, and your financial circumstances. Let's compare the two.
Who is Property Tax Funding?
Since 2008, Property Tax Funding has helped more than 12,000 Texas property owners address their property tax obligations. Licensed by the Texas Office of Consumer Credit Commissioner, we provide property tax loans to residential and commercial property owners across all 254 Texas counties.
Our Texas-based team handles loan servicing in-house, working with borrowers from the initial application through their final payment. One Texas team, from application to payoff. Your loan is never transferred to an outside servicer.
How Does a County Property Tax Installment Plan Work?
County property tax installment plans let you pay your delinquent property taxes over time instead of all at once. Under Texas Tax Code §33.02, you enter into a written agreement with your local tax office that outlines your monthly payments and repayment period.
The agreement includes your unpaid property taxes, along with any penalties and interest already owed. Your tax office sets the agreement length within the limits set by Texas law.
Under Texas law, installment agreements for qualifying residence homesteads must last at least 12 months. No county installment agreement can exceed 36 months.
Who Qualifies for a County Installment Agreement?
Eligibility for a county installment agreement depends on the type of property you own. Under §33.02, owners with a qualifying residence homestead exemption must generally be offered an installment agreement upon request. However, this requirement doesn't apply if the owner entered into an agreement under this section within the previous 24 months.
For other property owners, including those with commercial properties, the tax collector may offer installment agreements at its discretion. Approval isn’t guaranteed.
What Does a County Installment Plan Cost?
While a county installment plan can help you spread your property tax payments over time, that doesn't mean you won't incur additional costs. The penalties and interest you owe will depend on the type of property you own and whether you stay current on your agreement.
Interest Continues During the Agreement
Under Texas Tax Code §33.01, simple interest continues to accumulate at 1% per month, or 12% annually, on your unpaid property taxes. This applies even while you're making payments under an installment agreement.
This interest is separate from any penalties that were added to your balance before you signed your agreement.
Penalties Depend on the Property Type
If you have a qualifying residence homestead agreement, the standard monthly penalty stops accruing as long as you are current on your payments.
For other types of property, such as commercial property, penalties and interest usually continue to accrue during the agreement.
Under Texas Tax Code §33.02, if a homestead owner defaults on the agreement, penalties can be reinstated as though the agreement had never existed.
What Are You Agreeing to When You Sign a County Installment Plan?
Before signing a county installment agreement, understand exactly what you're agreeing to. Under Texas Tax Code §33.02(c), signing the agreement binds you to pay the taxes, penalties, and interest included in the plan.
This is important to understand because if you believe you have an erroneous tax bill or you intend to dispute the amount owed, you should do so before you sign the agreement. Once you’ve signed, you can’t withdraw your admission of liability for those charges.
For this reason, carefully review the amounts listed in your agreement and ask your tax office about any questions before signing.
What Happens If You Miss a County Installment Payment?
When you enter into a county installment agreement, you're responsible for more than just making your monthly payments. You must also meet the other conditions outlined in your agreement. Failing to do so can put your agreement in default.
Missing a Monthly Payment Can Reinstate Penalties
If you miss a required payment, your installment agreement may go into default. For qualifying homestead owners, this means the penalties that stopped accumulating during the agreement can be reinstated as though the agreement had never existed.
As a result, your outstanding balance could increase beyond the amount of the missed payment.
Falling Behind on New Property Taxes Can Also Cause Default
Even while paying off delinquent property taxes, you must continue paying any new property taxes owed to the same taxing unit by their deadlines.
For example, suppose you're making monthly payments toward last year's property taxes. If you fail to pay your next property tax bill on time, you could default on your existing installment agreement, even if you've made every scheduled installment payment.
The Tax Collector Must Send a Default Notice
Under Texas Tax Code §33.02, an installment agreement protects your property from collection lawsuits and tax sales as long as you meet its terms.
If you default, the tax collector must send you a notice of default before proceeding with a lawsuit or sale. At that point, you could face additional collection action, including the possibility of losing your property for unpaid property taxes.
How Does a Texas Property Tax Loan Work?
A Texas property tax loan works differently from a county installment agreement. Instead of paying your local tax office directly, a licensed property tax lender pays your outstanding property taxes on your behalf.
Under Texas Tax Code §32.06, the taxing unit's lien is transferred to the lender. You then repay the lender under a written financing agreement that includes applicable interest and fees.
Property Tax Funding offers repayment terms of up to 10 years with no credit check. This gives qualifying property owners more time to repay their balance than the maximum 36 months allowed under a county installment agreement.
Who Cannot Use a Property Tax Loan?
Not every Texas property owner qualifies for a property tax loan. Texas Tax Code §32.06(a-3) says that homeowners age 65 or older who qualify for the over-65 residence homestead exemption cannot obtain a property tax loan on that homestead.
However, these homeowners may qualify for a property tax deferral. This would allow them to postpone property tax collection while interest continues to accumulate.
What Interest Rates and Fees Apply to Texas Property Tax Loans?
Texas property tax loans include interest and may include fees that add to the total amount you repay. State law limits certain charges, but your actual borrowing costs depend on the terms of your financing agreement.
Loan Interest
Under Texas Tax Code §32.06(e), the interest rate on a Texas property tax loan cannot exceed 18% a year. In practice, rates are typically well below that cap. Annual reports filed by licensed Texas property tax lenders with the Texas Office of Consumer Credit Commissioner have shown average rates in the low to mid teens. Your rate depends on your loan agreement.
This is the maximum rate allowed by law, not necessarily the rate you will be charged. Review your loan agreement to understand the interest rate and total repayment amount.
Residential Loan Closing Costs
Texas also limits certain closing costs on residential property tax loans. Under 7 Texas Administrative Code §89.601, these costs are generally capped at $900.
However, certain additional charges, including permitted lien recording fees, may be charged separately. The $900 limit does not apply to commercial property tax loans.
Before signing a financing agreement, review all applicable interest charges, closing costs, and other fees.
Property Tax Loan vs. County Installment Plan Comparison
Both county installment plans and property tax loans provide ways to address delinquent Texas property taxes. However, the two arrangements differ in who qualifies, how long you have to repay the balance, and what happens if you miss a payment.
The table below compares the two options to help you understand which arrangement may fit your financial situation.
| Feature | County Installment Plan | Property Tax Loan |
|---|---|---|
| Who qualifies | Qualifying residence homestead owners generally must be offered an agreement upon request, unless they had one within the previous 24 months. The tax collector approves agreements for other properties at their discretion. | Eligibility depends on state law and lender requirements. Certain homeowners with an over-65 homestead exemption cannot obtain a loan on that property. |
| Repayment term | At least 12 months for qualifying homestead agreements, with a maximum of 36 months for all agreements. | Property Tax Funding offers repayment terms of up to 10 years. |
| Interest | Simple interest continues at 1% per month, or 12% per annum, on unpaid taxes. | Set by the loan agreement. Capped by law at 18% a year; average reported rates are well below the cap. |
| Penalties and fees | Monthly penalties stop accumulating for qualifying homestead owners who remain current. For other properties, penalties generally continue. | Interest and applicable closing costs or other permitted fees apply. |
| Missed payments | Default can reinstate penalties. The tax collector must provide a default notice before pursuing a lawsuit or sale. | Consequences depend on the loan agreement and applicable law. |
| Future property taxes | Other property taxes owed to the same taxing unit must be paid when due to avoid default. | New property tax bills remain the owner's responsibility, but may be financed into the existing repayment agreement. |
| Credit requirements | No credit check. | Property Tax Funding does not require a credit check. |
| Who receives payments | The tax collector receives your installment payments. | You repay the property tax lender after it pays your outstanding taxes. |
The main differences come down to repayment time and the conditions you must meet. A county installment plan has a shorter repayment period and specific default rules. A property tax loan may allow a longer repayment period, depending on the lender and your eligibility.
Remember that a longer repayment term can also affect the total amount you pay in interest and fees. Review the full terms of either arrangement before deciding.
When Might a County Installment Plan Make Sense?
A county installment plan may be worth considering if you have a relatively small amount of delinquent property taxes and can afford to repay the balance within the approved term.
For example, what if you fell behind on your property taxes but have enough monthly income to pay off the balance over 12 months? A county installment agreement may be a good option if you can make every installment payment while staying up to date on future property tax bills.
This arrangement may also make sense if your taxes have only recently become delinquent and you have a predictable source of income.
However, know that interest will continue to accumulate throughout the agreement. You'll be responsible for meeting all payment deadlines to avoid default and possible additional penalties.
When Might a Property Tax Loan Make Sense?
A property tax loan may be worth considering if you owe a larger amount in delinquent taxes or have unpaid property taxes from several years. It may also be an option if you need more time to repay your balance than a county installment agreement allows.
For example, if you own commercial property and owe several years of property taxes, you may need more than the county's maximum repayment period. And since tax collectors aren't required to offer installment agreements for commercial properties, a loan may be an alternative.
A property tax loan may also be worth considering if you've defaulted on an existing county installment agreement.
However, you'll need to qualify for financing and consider the interest, fees, and transferred tax lien before deciding.
Are There Other Ways to Pay Texas Property Taxes?
In addition to county installment agreements and property tax loans, some Texas homeowners may qualify for other payment arrangements.
Quarterly Property Tax Payments
Under Texas Tax Code §31.031, qualifying homeowners age 65 or older, individuals with disabilities, and certain disabled veterans can pay their homestead property taxes in four installments. To avoid standard delinquency penalties, you need to make the first payment before the delinquency date.
Property Tax Deferral
Under Texas Tax Code §33.06, qualifying homeowners in these groups may postpone property tax collection on their homestead. During an eligible deferral, standard delinquency penalties do not accrue, but interest continues at 5% annually. The taxes remain owed and must eventually be paid.
Frequently Asked Questions About Property Tax Loans and County Installment Plans
Can I Get a County Installment Plan for Delinquent Property Taxes in Texas?
Yes. Texas property owners with a qualifying residence homestead exemption generally have the right to request a county installment agreement, unless they've had one within the previous 24 months. For other properties, the tax collector approves the agreement at their discretion.
How Long Can I Have to Pay Off a County Property Tax Installment Plan?
County property tax installment plans can last up to 36 months. Agreements for qualifying residence homesteads must provide at least 12 months to repay the balance. The tax collector determines the actual term within these limits.
Do Penalties and Interest Stop During a County Installment Agreement?
Interest doesn't stop. It continues at 1% per month for the life of the agreement. Monthly penalties stop only for qualifying homestead owners who stay current. For other property, penalties and interest generally continue.
What Happens If I Miss a Payment on My County Installment Plan?
Missing a county installment payment can put your agreement in default and reinstate penalties. Failing to pay new property taxes owed to the same taxing unit can also cause default. The tax collector must provide a notice of default before pursuing a lawsuit or tax sale.
Can I Get a Property Tax Loan If I Am 65 or Older?
Being 65 or older doesn't automatically prevent you from obtaining a Texas property tax loan. However, homeowners who qualify for an over-65 residence homestead exemption cannot obtain a property tax loan on that homestead under Texas Tax Code §32.06(a-3). A property tax deferral may be available instead.
Discuss Your Property Tax Payment Options With Property Tax Funding
Choosing between a county installment plan and a property tax loan requires you to consider how much you owe, how soon you can repay the amount due, and whether you can keep up with future payments.
Property Tax Funding has helped more than 12,000 Texas property owners since 2008. Our Texas-based team can help you understand your financing options and determine whether a property tax loan fits your needs.
Get your free estimate today or contact us at 877-776-7391 to discuss your situation.
