Texas Property Tax Loans and the Texas Tax Code

The Texas tax code allows residents who own real estate property to take out a loan from third party lenders to pay their past due property taxes. Many may think this is an easy way to avoid the penalties associated with delinquent taxes such as liens against the property; but property tax loans come at a high price. When taking out a property tax loan the property owner will mostly likely incur exorbitant fees. For example, while the Texas taxing authority can only charge you 12% interest, the lender can charge up to 18% interest on the loan. Also, the lender has the power to place a lien on the property and foreclose if the borrower defaults under the terms of the loan. If the mortgage lender fails pay the tax transfer lien prior to the foreclosure sale, the mortgage lender may recover the property after the foreclosure – but for 25% more, according to Texas law.

Although the Texas Tax Code was amended in 2007 to provide additional protections for consumers, including a two part foreclosure process, additional notice provisions, and licensing requirements for the tax loan lenders, tax loans are still risky business.