If you’re thinking about buying a property, chances are you’ve heard something about “property tax loans.” But what is a property tax loan, and how do they work? Here is a quick overview of what a property tax loan is and some of the key documents/information you’ll need to apply for one of these mortgages.
What is a property tax loan?
A property tax loan is a way for buyers to finance their down payment on a home. It’s essentially a mortgage: you get a loan from a bank based on the value of your home, and then pay it back over time (usually 20 years). The only difference is that instead of paying back the loan with interest, as in an ordinary mortgage, you pay back a percentage of your total property taxes over that same period of time. Property taxes are paid annually by homeowners in most states and municipalities; so generally speaking, each month’s payment will go toward paying down your principal balance by one dollar less than last month.
What are important documents required when applying for a property tax loan?
1. The Security Instrument
A security instrument is a document that allows you to borrow money from a lender (or another security provider) to purchase a property. It’s required in a property tax loan because it ensures that any money you borrow from the lender will be repaid and that the lender has legal ownership of your property in case anything goes wrong. It describes the terms of the loan and specifies who is liable for what if the borrower defaults.
2. The Promissory Note
The Promissory Note is the document that describes how much money is borrowed, how long it takes to repay, and how much interest will be paid over time. The Promissory Note also details how payments are made and when they are due.
The Sworn Document Authorizing Transfer of Tax Lien certifies that the person requesting the loan has received permission from any local government agency that has a claim on property taxes owed on that property.
In the end, getting a Property Tax Loan is an easy way to minimize your tax burden. The application process is relatively painless, and the payoff can be substantial. Just remember to check into the requirements your state has regarding this loan before applying.