Can I Lose My Home Because of Overdue Property Taxes?

by Lynnette Khalfani-Cox, The Money Coach

in Investing, Real Estate, Taxes

eviction notice

Missing mortgage payments isn’t the only way you can lose your home. Falling behind on your property taxes – no matter whether you owe thousands or just a few hundred dollars – also puts you at risk of foreclosure.

In fact, tax lien foreclosures take place every day in America. When you don’t pay property taxes you owe, your city or county has the legal right to put a high-priority tax lien on your property in the amount of the past due taxes, plus interest and penalties.

After a set period of time – typically anywhere from six months to two years, depending on where you live – if your taxes are still unpaid the taxing authority’s tax lien gives them the right to foreclose on your property. Your home then gets sold at an auction to anyone willing to pay off the back taxes due. Lots of investors buy “tax lien certificates” in the hopes of getting a home in tax foreclosure. For these investors, it’s a way for them to purchase a home at a fraction of its value – without even having to pay off the mortgage due on the house.

Property Tax Delinquency Can Lead to Foreclosure

The number one reason people become delinquent on their property taxes is because these taxes can run into the thousands, driving up the cost of homeownership considerably. Some lenders want you to add your property taxes into the monthly mortgage payment you make – to be sure those payments get paid on time. So if the principal and interest on your mortgage totals $2,000 per month and your annual property tax bill is $2,400, that’s an additional $200 a month tacked onto your payment.

Check out the taxes paid in the following 9 states, which have the highest property taxes in the country. You’ll notice that the top five states with the biggest tax bills are all located in the Northeast. However, even Midwest states, such as Illinois, and Western states, like California, make the list.

State / Median Property Tax

1. New Jersey $5,352

2. New Hampshire $3,920

3. Connecticut $3,865

4. New York $,3076

5. Massachusetts $2,974

6. Illinois $2,904

7. Vermont $2,835

8. Wisconsin $2,777

9. California $2,278

Source: Census Bureau, Tax Foundation
Fortunately, even if you live in a community with high property taxes, there are some smart ways to go about lessening your tax burden – and subsequently keeping your home.

5 Tips to Solve Your Biggest Tax Worries


Related Questions:

  • what happens if your property taxes are sold in illinois
  • if i pay offmotgage can iget deed tho i owe past propsrtyy taxe
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Lynnette Khalfani-Cox, The Money Coach

Personal Finance Expert and Co-Founder at Ask The Money Coach.com
Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.

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{ 4 comments… read them below or add one }

Lynnette Khalfani-Cox, The Money Coach

Have you considered negotiating with your creditors to reduce your credit card payments? Have you considered talking to a debt counselor?
http://askthemoneycoach.com/trusted-resources-network/

kevin kerekes

I can no longer pay my property taxes in full,I live on a fixed income,and I have at least 4000.00 in credit card det,what are my options?

The Money Coach

I’m not 100% sure of what you’re asking. But I think you may be inquiring about what a mortgage lender can and can’t do if they take over the loan servicing of a mortgage. To my knowledge, if you didn’t pay your back taxes (i.e. property taxes), a bank can deem that the property was, in fact, “in danger” of foreclosure. Were those property tax payments supposed to be escrowed and paid along with your mortgage (i.e. the principal and interest). If so, and even if they weren’t, some banks may not want to take the risk of you losing a home because of unpaid property taxes. So when they pay that tax bill, it’s because they’re trying to protect their legal interest in the home. That home is the collateral on the mortgage you took out.

As for them drastically increasing the payments, if you were behind on a mortgage, depending on the state you are in and the clauses contained in your mortgage agreement, there may be an “acceleration” clause which essentially gives the bank the right to demand payment in full on your mortgage. The best way to know for sure about your rights and responsibilities is to consult a real estate attorney or legal expert with housing knowledge and expertise.

Teresa LaChapelle

Can a mortgage company buy another mortgage, pay back taxes (the property was not in danger of foreclosure) and drastically increase the payments?

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