Property owners across Texas make tax payments yearly on their homes and other real estate. When families are faced with tax bills that they can’t pay, the situation can become frightening. If property taxes become delinquent, individuals can face losing their homes or businesses, which is one reason so many are willing to turn to what some are calling predatory loans to handle tax burdens.
One man owed $19,000 in delinquent property taxes. In a bid to save his property, the man accepted a loan from a property tax company. The loan was issued for 10 years at 18-percent interest, which means the man will pay back over twice what he borrowed. That man is not alone – according to the state’s House Business and Industry Committee, these types of loans are trending up. In 2008, there were $119 million worth of property tax loans. In 2013, that number was $201 million.
While property tax loans may seem like a good way to preserve property ownership and handle tax bills, the loan itself may put property in danger. The loan company has a lien priority on properties in these cases; if the homeowner cannot or does not pay timely on the property tax loan, the lender may have some right to the property. In the event the home is foreclosed on and a short-sale occurs, the property tax lender is paid before others, which could cause a problem for homeowners in such situations.
Because there are often other solutions to large tax bills – including legal processes and negotiating with the tax agency – individuals may want to consider thinking twice about property tax loans. Before taking a loan for any tax burden, consider some options for reducing or settling tax debt at a lower rate.
Source: Star Telegram, “Property tax loans can be big mistake,” Eric Sandberg, May. 12, 2015
