How a Texas Property Tax Loan Works
Texas lets a licensed property tax lender pay your property taxes for you. In exchange, the county transfers its tax lien to the lender (Texas Tax Code §32.06). You then repay the lender in installments, with interest.
The important part is what the lender gets: the county's lien keeps its priority over your mortgage, and the lender can foreclose on it if you stop paying. That is why these loans are relatively easy to get, and why they deserve more care than an ordinary personal loan.
The model is close to unique to Texas. Elsewhere, unpaid taxes are typically sold to investors at tax lien or tax deed auctions, which is a different thing entirely; see what happens if you don't pay property taxes.
The Rules Lenders Have to Follow
- Licensed by the state. Property tax lenders must hold a license from the Texas Office of Consumer Credit Commissioner (OCCC). You can look any lender up on the OCCC's license search.
- Interest is capped at 18% a year on the money advanced.
- Closing costs are capped at $900 for a residential loan, plus $100 per additional parcel and some title costs. The state's Finance Commission declined to raise the cap in December 2025.
- No prepayment penalty on an owner-occupied home.
- Three-day right to cancel after signing, on an owner-occupied home.
- If you have a mortgage, only delinquent taxes can be financed. A contract to pay not-yet-delinquent taxes on a mortgaged home is void.
- Homeowners 65 and older cannot use one on a homestead that qualifies for the over-65 exemption. The law steers them to the much cheaper deferral instead (below).
- Every ad has to tell you about the alternative: mail and online ads must carry a bold notice that your tax office may offer delinquent tax installment plans that may be less costly, and any rate must be shown as an APR.
- Foreclosure protections: no judicial foreclosure in the first year after the lien is recorded unless the contract says otherwise, and after a foreclosure on a homestead you can still redeem for two years, at 125% of the price in the first year and 150% in the second.
The average residential property tax loan in Texas was about $21,000 in 2024, according to the state regulator, which tells you who tends to use them: owners of high-value homes with large tax bills, and owners of commercial property.
What It Costs to Do Nothing
A lender's pitch rests on Texas's delinquency charges being steep, and they are. Taxes unpaid on February 1 accrue:
- Penalty: 6% in February, plus 1% for each further month, reaching 12% on July 1.
- Interest: 1% a month, with no cap.
- Collection fee: from July 1, up to 20% on top of tax, penalty and interest, in counties that contract with a collection attorney (most large ones do).
So a bill left unpaid for a year can cost close to 50% more. A loan at 18% can genuinely be cheaper than that. The question is whether something cheaper still is available to you, and usually it is.
Side by Side: a $5,000 Bill, Delinquent on February 1, Cleared Over About 12 Months
| Option | Approx. total paid | Notes |
|---|---|---|
| Do nothing, pay after a year | ~$7,380 | 12% penalty, 12% interest, 20% collection fee from July |
| Property tax loan at 18% | ~$6,930 | Taxes paid in February ($5,350 with 7% penalty and interest), plus $900 closing and recording, 12 monthly payments |
| Property tax loan at 12% | ~$6,720 | Same, at a lower negotiated rate |
| County installment agreement | ~$5,700 | Interest of 1% a month continues, but no more penalty |
| Home equity line (illustrative 7.75%) | ~$5,210 | Plus any setup fees; only if you already have or can get one |
| 65+/disabled deferral | ~$5,250 a year later | 5% a year, no penalty, no sale while you live there |
| 65+/disabled four installments, started before Feb 1 | $5,000 | No penalty or interest at all |
These are our calculations under the stated assumptions. Collection fees and some terms vary by county, so check your own tax office's numbers.
The Cheaper Options, in Order
- Four interest-free installments (65+, disabled, disabled veterans). If you qualify and pay the first quarter before February 1, you can split the homestead bill into four payments with no penalty or interest.
- Deferral (65+, disabled, disabled veterans). You can defer the taxes on your homestead for as long as you live there, at 5% a year, with no penalty and no lawsuit or sale. The deferred amount is paid when the home is sold or the estate settles. See deferral programs for seniors.
- A county installment agreement. Any homestead owner can get a 12 to 36 month agreement on request if they have not had one in the past 24 months. Penalties stop growing; interest continues. Ask the tax assessor-collector before July 1 to avoid the collection fee where possible.
- The half-payment option, in counties and cities that have adopted it: pay half before December 1 and the rest before July 1 with no penalty. Plan for it next year.
- Lower the bill itself. Missing exemptions and inflated values are common; see the Texas homestead exemption (late filing can bring refunds for up to two years) and how to protest in Texas.
When a Property Tax Loan Can Make Sense
When you are under 65, have no cheaper credit, the tax office's installment agreement is not available to you (for example, you used one recently, or it is not a homestead), and the bill would otherwise sit unpaid into July and pick up the collection fee. In that narrow case, a licensed lender at a competitive rate with closing costs well under the $900 cap can save money. Get at least two quotes and compare the APR, not the monthly payment.
Red Flags
- The lender does not appear on the OCCC license search.
- Closing costs above $900 on a single residential parcel.
- A rate quoted without an APR, or a mailer without the installment-plan notice.
- An offer to pay taxes that are not yet delinquent on a home that has a mortgage.
- Any approach to a homeowner 65 or older about their homestead.
- Pressure to sign quickly or to waive rights; Texas law does not let you waive the protections in §32.06.
Bottom Line
A Texas property tax loan stops penalties and collection fees, at up to 18% interest plus up to $900 in closing costs, secured by a lien that can lead to foreclosure. That can beat doing nothing. It rarely beats a county installment agreement, and it never beats the deferral or four-installment options if you are 65 or older or disabled. Call your county tax assessor-collector first; take the loan only if the cheaper doors are closed.
General information, not legal or financial advice. Figures are based on the Texas Tax Code and OCCC rules as of October 2026; the comparison table uses illustrative assumptions. Confirm terms with your county tax office and any lender before signing.