Texas Property Tax Loans and Tax Lien Transfers
Texas Property Tax Loans and Tax Lien Transfers
Information, not legal advice. Laws change; check the current statute or rule and talk to a Texas attorney before you act.
Texas has a lending product most states do not: the property tax loan. A licensed lender pays an owner's property taxes to the taxing units, and the government's tax lien is transferred to the lender. The lender then holds a lien that keeps the tax lien's priority, ahead of most mortgages, and the owner repays the lender over time.
The legal pieces are Tax Code §32.06 (the transfer), Tax Code §32.065 (the loan contract), Finance Code chapter 351 (licensing and conduct), and the Finance Commission's rules in 7 TAC chapter 89. The regulator is the Office of Consumer Credit Commissioner (OCCC).
Why the lien matters
On January 1 each year a tax lien attaches to property to secure that year's taxes, penalties and interest (Tax Code §32.01). That lien has priority over a homestead interest and over the claims of other lienholders, including mortgages and HOA liens, even if those existed first (§32.05). When the lien is transferred to a property tax lender, the lender is subrogated to the taxing unit's rights and remedies, including foreclosure, but cannot foreclose where the taxing unit itself could not (§32.065(c)).
That priority is why the product exists, and why the law surrounds it with rules.
How a transfer works, step by step
- Owner authorizes payment. The owner signs a sworn document authorizing the lender to pay the taxes. It must name the lender, describe the property, and state that the owner was told a disabled owner may qualify for a §33.06 deferral (§32.06(a-1)). The lender adds its license number (Finance Code §351.054).
- Lender pays the tax office. The lender pays the taxes, penalties, interest and collection costs.
- Collector certifies the transfer. The collector issues a tax receipt and a certified statement that the lien is transferred, within 30 days, and marks the transfer date on the account (§32.06(b)).
- Lender records it. The transfer is recorded in the deed records of each county where the property sits (§32.06(d)).
- Mortgage holder is told. Within 10 business days of receiving the certified statement, the lender sends a copy of the sworn document by certified mail to the mortgage servicer and each recorded first-lien holder (§32.06(b-1)).
For residential property used for personal or household purposes, the federal Truth in Lending Act right of rescission applies (§32.06(d-1)).
Which taxes can be financed
- Delinquent taxes, at the time of payment; or
- Current taxes that are due but not yet delinquent, only if there is no recorded mortgage lien on the property (§32.06(a-2)).
A contract that tries to authorize payment of taxes that are not yet due, or that lacks the sworn authorization, is void (§32.06(a-7)).
Who cannot get one
| Situation | Rule |
|---|---|
| Owner is 65 or older and eligible for the over-65 homestead exemption on the property | May not authorize a transfer (§32.06(a-3)) |
| Home was financed with a government or nonprofit grant or below-market loan still subject to its covenants | No transfer (§32.06(a-8)(1)) |
| Property carries a city substandard-building lien under Local Government Code ch. 214, subch. A | No transfer (§32.06(a-8)(2)) |
| Taxes not yet due, or current taxes on a mortgaged property | Not eligible (§32.06(a-2), (a-7)) |
Disabled owners are not barred, but the deferral notice in the sworn document is mandatory.
Rates, fees and timelines
- Interest cap: 18% a year on the funds advanced. "Funds advanced" means the taxes, penalties, interest and collection costs on the receipt, recording costs, and reasonable closing costs (§32.06(e)).
- Late charge on residential consumer loans: no more than 5 cents per $1 of a scheduled installment, after 10 days late (§32.06(e-2)).
- After closing, the lender may charge only the fees the law lists, such as a release-filing fee, a payoff statement fee after the first one, a balance-information fee, and the items in Finance Code §351.0021 (§32.06(e-1); §351.0021(c)). Prepayment penalties are not allowed on residential owner-occupied loans (§351.0021(a)(9)).
- Closing costs on residential loans are capped by rule at $900, plus up to $100 per additional parcel and certain title-cure costs (7 TAC §89.601(c)).
- Payoff statements to an existing lender must be delivered within a period set by rule that allows at least 7 business days (§32.06(a-6)).
- No foreclosure for one year. A judicial foreclosure cannot start within one year after the lien is recorded, unless the contract provides otherwise (§32.06(i)).
- Mortgage lender's cure right. If the tax loan is 90 days delinquent, the tax lender must notify prior lienholders by certified mail by the 120th day. The mortgage holder then has 6 months to pay off the tax loan and get a release (§32.06(f)). The mortgage servicer that pays becomes subrogated to the lien (§32.06(h)).
- Redemption after a tax-loan foreclosure: the former owner or prior mortgage servicer can redeem for 125% of the price in year one or 150% in year two, plus costs; two years for homesteads, ag land and minerals, 180 days for other property (§32.06(k), (k-1)).
Licensing
A person must hold a chapter 351 license to make, transact or negotiate property tax loans, or to charge the fees and interest those loans allow (Finance Code §351.051(a)). Anyone who advertises or solicits property tax loans is presumed to be in the business (§351.009(b)). Exempt: banks, savings institutions, credit unions and their affiliates, relatives within the second degree, and individuals making five or fewer loans from their own funds in 12 months (§351.051(c)). Loans can be sold only to licensed or exempt persons (§351.003(b)).
Individuals who originate property tax loans on a principal dwelling must also hold an individual residential mortgage loan originator license and be enrolled in the NMLS (§351.0515). The OCCC examines lenders and can assess penalties (§§351.006, 351.008).
How big the industry is
OCCC data reprinted in its 2025 consumer loan study show that in 2024 lenders made 10,346 property tax loans totaling $281.3 million, with 53 companies reporting. The average residential loan was $21,399 at an average rate of 13.99%. The industry relies on direct mail, web search and repeat customers, according to the same report. Advertising rules are in Property tax lender advertising rules.
How this shows up in Agentix Data
For the counties we cover, our delinquent rolls show years and amounts owed and whether a tax suit has been filed, and our appraisal-district records carry homestead and over-65 exemption codes so you can exclude ineligible owners. We do not carry mortgage or deed-of-trust data, so "is there a recorded mortgage?" (which decides whether current-year taxes can be financed) still needs a title or clerk check.
Sources
- Texas Tax Code §32.06 (property tax loans; transfer of tax lien): https://statutes.capitol.texas.gov/Docs/TX/htm/TX.32.htm#32.06 and https://texas.public.law/statutes/tex._tax_code_section_32.06
- Texas Tax Code §32.065 (contract for foreclosure of tax lien) and §§32.01, 32.05 (lien and priority): https://statutes.capitol.texas.gov/Docs/TX/htm/TX.32.htm
- Texas Finance Code ch. 351 (property tax lenders), including §§351.0021, 351.003, 351.009, 351.051, 351.0515, 351.054: https://statutes.capitol.texas.gov/Docs/FI/htm/FI.351.htm
- 7 Tex. Admin. Code §89.601 (closing cost limits): https://www.law.cornell.edu/regulations/texas/7-Tex-Admin-Code-SS-89-601
- OCCC, Property Tax Lenders licensing: https://occc.texas.gov/industry/property-tax-lenders/
- OCCC, 2025 Study of Consumer Loan Products (2024 property tax loan figures, marketing): https://occc.texas.gov/wp-content/uploads/2025/12/2025_study_consumer_loan_products.pdf
- OCCC, Residential Mortgage Loan Originators: https://occc.texas.gov/industry/rmlos/
General information, not legal or financial advice.