Tips & Advice
Why are Property Taxes the Scariest Kind of Debt?
You’re working to pay down the debt on your home by making your monthly mortgage payments. But the debt against your home can also grow in a few ways, missed mortgage payments, mechanical liens if a contractor is not paid, or delinquent property taxes.
Delinquent taxes seem to be the least serious at first, but they’re probably the worst in the long run. Just because you miss a tax payment doesn’t mean that you’re stuck. Like most situations in homeownership, the sooner you catch the problem and work through options the better equipped you will be to solve it.
If you don’t pay a contractor, and they file a mechanical lien on your home, the process may take a few months. If you get behind in your mortgage payments, it likely takes more than 6 months for a bank to move through foreclosure proceedings. Delinquent property taxes typically stretch out for years before you see the real consequences.
Unlike delinquent mortgages and mechanical liens, delinquent property taxes may be collected without protecting any of your equity in the home.
Property taxes are owed to government entities, cities, counties, and states. You will get regular notices about any unsettled tax debts, but most government tax offices take at least 2 years of delinquency, before working to transfer ownership of property.
This means you have time to raise the necessary funds, refinance your home, or sell to pull equity out and settle the debt. By planning and acting ahead of time, you maintain more control of how the debt is settled and ultimately protect more of the equity you have worked to build.
Sometimes we encounter financial stresses, and sometimes these put us behind on our obligations. In any situation the sooner we plan and act the better; it’s important to know the risks and consequences of our debts and how to settle them.
We hope this is helpful, and reading is great, but we know it doesn’t always answer all of your questions. Sometimes you need a conversation partner – someone to bounce off of with your ideas and questions. We can do that too; we’re a phone call away.
