Thousands of El Paso County homeowners don’t have mortgages on their homes, which means they pay their own property taxes and also likely have more spendable income — which might provide a boost for area retailers, an expert said.
The fact that many El Pasoans don’t have a mortgage came to light in the past few weeks as several hundred homeowners rushed to the city’s Consolidated Tax Office in Downtown El Paso to pay their 2016 property taxes by the Jan. 31 payment deadline.
The U.S. Census Bureau estimates that almost 42 percent of El Paso County, owner-occupied homes had no mortgages in 2015 — well above the nationwide rate of 35 percent, according to the agency’s latest data.
Tax office data, as of Jan. 31, show 2016 taxes on 100,115 properties in El Paso County were paid by mortgage companies via the owners’ escrow accounts. Most of those likely are single-family homes, said Maria Pasillas, tax assessor-collector, who manages the office. It collects property taxes for 39 taxing agencies, including the city, school districts and University Medical Center of El Paso.
It’s likely just under half of the 210,186 single-family homes sent tax notices in 2016 have a mortgage, the tax office data indicate.
That means just more than half of those single-family homes sent tax notices in El Paso County in 2016 likely have no mortgages and the homeowners likely pay the property taxes themselves, the data indicate. The tax office doesn’t track exactly how many of the single-family homes have a mortgage and exactly how many homeowners pay their own property taxes.
George Cordova, 75, who was at the city tax office Tuesday to meet the tax payment deadline to avoid penalties, said he’s been paying property taxes on his own for about 40 years because he paid off his home mortgage around 1975.
“If you have no mortgage, you can use the (extra) money to go on vacation, play golf. It does help me out,” said Cordova, a retired city Streets and Maintenance Department worker.
Tom Fullerton, an economics professor at the University of Texas at El Paso, said having a lot of homeowners without mortgages who no longer are making interest and principal payments on home loans “probably helps local business conditions.”
“It frees up more disposable income” and that helps retail stores the most, he said. That positive effect on the local economy also assumes that most of El Paso’s home mortgages are financed and serviced by out-of-town companies, which would get most of the mortgage revenues, he said.
Harold Hahn, chief executive officer of Rocky Mountain Mortgage, a large El Paso home mortgage company, said paying off a mortgage as soon as possible isn’t good for his business, “but it’s good for the homeowner,” who then has income freed up for other things, he said. Just putting an extra $100 per month toward principal on a mortgage loan will greatly speed up the payoff time, he noted.
UTEP’s Fullerton said El Paso County has a larger percentage of homes without a mortgage than the national rate due to several factors, including that El Paso is an area where “people really put down roots” and don’t relocate to other cities as much as in other large metro areas, he said. Living in the same house for a long period makes it easier to pay off the mortgage, he said.
Homes cost less in El Paso compared to many other large metro areas, also making it easier to pay off a mortgage, Fullerton said.
Texas law also doesn’t allow for the many exotic-type mortgage loans that got many homeowners into financial trouble during the housing bust about 10 years ago, Fullerton said. Some of those mortgages included ones allowing a homeowner to make interest-only payments in the first few years of a loan. But the loan payments increased significantly in subsequent years, making payments more difficult to pay.
Cordova, who owns a home in the Ascarate Park area, fits the entrenched El Paso homeowner profile Fullerton described.
Cordova and his wife thought about buying a different home over the years, but found no reason to move, Cordova said.
“We know everyone in the neighborhood. We feel comfortable,” he said.
Hahn, the Rocky Mountain Mortgage CEO, said most people paying their own property taxes probably have paid off their mortgages. Some of those might be people who refinanced their homes in the low-interest climate of recent years to a 15-year mortgage, which obviously is paid off quicker than a standard 30-year mortgage, he said.
It also could include some people who opted out of having a mortgage company pay their taxes through an escrow account, Hahn said.
That number is probably small, he said, because that usually requires the buyer getting a conventional home loan, making a down payment of 20 percent or more of the sales price, which on a $130,000 home, for example, would be at least $26,000, and meeting other financial requirements. The mortgage company also would ascertain the buyers’ ability to pay their own property taxes without the discipline of an escrow account, Hahn said.
A homeowner also could later ask to opt out of an escrow account after at least 20 percent of a home is paid off and other financial requirements are met, he said.
At Rocky Mountain Mortgage, 60 percent or more of its home loans are backed by the Federal Housing Administration or the U.S. Department of Veterans Affairs, which require escrow accounts to pay taxes and insurance, Hahn said.
Paying a property tax bill without an escrow account can be difficult as El Paso’s rising property taxes and a home’s rising valuation increase the annual tax bill, he said.
“From a budgeting standpoint, people can do one-twelfth of that (each month) through their mortgage payments,” Hahn said.
Fullerton said he periodically talks to people who have run into problems with their property taxes because, he said, they didn’t budget properly to pay the taxes on time.
Cordova said he has enough retirement income to keep money in the bank to pay his property taxes without problems. He pays in four quarterly installments, something allowed for qualified owners who are at least age 65 or disabled military veterans and surviving spouses of those veterans.
About 2.5 percent of all property tax bills, not just for homes, in El Paso County are delinquent annually, an annual average that’s held stable in the past several years, said Pasillas, the tax office director. No delinquency data was available for homes only.
Irma Lopez, a city spokeswoman, said the delinquent taxes are at a level city officials are able to account for in the city’s annual budget without problems.
Sixty-four percent of the city’s property tax revenues go to its general fund, which pays for city operations, city data show. The other 36 percent of the city’s property tax revenues go to pay for costs of its bonds and other debts.
Other taxing agencies also rely heavily on property tax revenues, including school districts, El Paso County and University Medical Center.