How Texas Property Tax Loans Work

The legal framework

Texas property tax loans exist because of two specific statutes:

• Texas Tax Code §32.06 — allows a homeowner to authorise a third party to pay delinquent property taxes and receive an assignment of the underlying statutory tax lien. This is unique to Texas; most US states do not allow private lien assignment.
• Texas Finance Code Chapter 351 — licenses and regulates the property tax lenders that operate under §32.06. It defines authorised charges (§351.0021), prohibits waiver of consumer rights (§351.0022), and requires solicitation notices (§351.0023). Title 7 Chapter 89 of the Texas Administrative Code adds the OCCC's specific rules.

Every licensed Texas property tax lender appears in the OCCC ALECS public licensee database. Verify any lender's licence there before signing.

The 5 steps

1. Get a quote (no credit check)

You provide your property address, the tax bill amount, and contact info. Most lenders return a quote within 24-48 hours showing APR, monthly payment, term, and total cost. Because the loan is secured by the statutory tax lien (not your general credit), there is no credit pull at this stage.

2. Sign the loan agreement and §32.06 authorisation

If you accept, the lender provides a Truth-in-Lending Act disclosure (the federal "TILA" form) and a Texas-specific §32.06 authorisation that lets them pay the county on your behalf. The TILA disclosure shows the APR, finance charge, total of payments and amount financed. Authorised fees are limited by Texas Finance Code §351.0021.

3. The county is paid

The lender wires or mails funds directly to your county tax assessor-collector. As soon as the county marks the bill paid, the penalty schedule under Texas Tax Code §33 stops. The existing statutory tax lien is assigned from the county to the lender.

4. You repay the lender on a fixed schedule

Repayment terms are set in the loan agreement: fixed APR, fixed monthly payment, terms typically 12 to 120 months. Most Texas property tax lenders allow early payoff without prepayment penalties. Texas Finance Code §351.0022 prohibits waiver of any statutory consumer protection — meaning the lender cannot include any clause that asks you to give up rights you have under §32.06 or Chapter 351.

5. Lien release

Once the loan is paid in full, the lender files a lien release with the county clerk's office in the county where the property sits. Your title is then clear of the assigned tax lien. If you sell the property before payoff, the loan is paid off at closing from the proceeds, just like any other lien.

What the lender can and cannot charge

Texas Finance Code §351.0021 sets what a licensed property tax lender is allowed to charge above the principal:

• Interest — at the rate authorised under Texas Tax Code §32.06.
• Reasonable closing costs — typically a few hundred dollars, disclosed in the TILA form.
• Authorised post-closing fees — payoff statement preparation, lien release recording, and statutory legal costs in the event of default.

The lender cannot charge anything not expressly authorised by Texas Tax Code §32.06 or Chapter 351. Any additional fee you see in a quote should be itemised and explainable; if it isn't, walk away.

What happens if you default

Because the loan is secured by the statutory tax lien, the lender has the same foreclosure rights the county had before the assignment. Under Texas Tax Code §33.91, foreclosure on a tax lien must follow the same procedural protections as a regular tax foreclosure — including notice requirements and the homeowner's right to cure. In practice, lenders will work with borrowers on payment plans before initiating foreclosure, but the consequences of long-term non-payment are severe and you should treat the loan as you would a mortgage.

Alternatives to a property tax loan

• §33.06 deferral — for homeowners 65+ or with qualifying disability. 5% statutory interest, no closing costs, postpones collection until the property is sold or transferred. Almost always the cheapest option if you qualify.
• County-installment plan — Texas Tax Code §33.02 allows certain delinquent taxpayers to enter into installment plans directly with the county. Terms vary by county and are usually shorter than a private loan but can avoid penalty escalation if entered into early.
• Pay the county directly — if you can pay within the first month or two of delinquency, the total penalty + interest is still under 10% on the principal, which is usually cheaper than the closing costs and interest on any private loan.
• Sell or refinance — for borrowers with significant equity, a cash-out mortgage refinance or HELOC sometimes offers a lower APR than a property tax loan.