Oregon Property Tax Deferral Program Explained

Oregon Property Tax Deferral Program Explained

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The Oregon property tax deferral program is available to some seniors and disabled citizens and allows them to defer their Oregon property taxes with interest. One of the downfalls of this program has been that the participants were unable to keep their deferral status if they desired to obtain a reverse mortgage on their property. This pitfall will soon be history as governor Kate Brown has signed HB 2587 which takes effect September 29, 2019. The new law allows an individual whose residence is in the state’s tax deferral program to adopt a reverse mortgage that has at least 40 percent equity interest in their home at the time of filing their claim.

This new legislation changes the old rule that prohibits homeowners from having a reverse mortgage and being on the Oregon property tax deferral program: In the past people would have to choose between one or the other, whichever has the most benefit to them. With the change in this policy, now some homeowners in the tax deferral program are eligible to have a reverse mortgage available to them.

The law change DOES NOT allow for all who have reverse mortgages to be eligible for property tax deferral or vice versa. Only some are eligible to apply under certain circumstances. The Oregon dept of revenue states:

“The bill allows homeowners to be on the deferral program if:

(a) they were on deferral before 2011 with a reverse mortgage from before 2011 (grandfathers existing law to continue such eligibility); or

(b) they have a reverse mortgage entered into on or after July 1, 2011 and before January 1, 2017, and have equity of at least 40% at time of deferral application. This does not enable retroactive deferral payments for prior tax years but enables DOR to pay the taxes on deferral going forward for those homes.

If the home has a reverse mortgage entered into on or after January 1, 2017, the home does not qualify for deferral.

Applications for deferral will next be accepted in early-2020 (usually early-January), and the Department of Revenue will be requesting information from the applicants about debt balances against the home to verify sufficient equity to qualify and have a 2011-2016 reverse mortgage.”

When asked about the program details, the Oregon Dept. of Revenue explained further:

  1. If the home was not on deferral prior to 2011, they would only possibly be eligible with a reverse mortgage if the reverse mortgage was entered into from 2011 through 2016. They would not be able to qualify with a reverse mortgage begun January 1, 2017 or later. If an owner is currently on deferral and then obtains a non-qualifying reverse mortgage (one entered into after 2016), their deferral account would go into inactive status and the homeowner would be billed the annual property taxes going forward. The previously deferred taxes would remain deferred until the person disqualifies the home from the program.
  2. If the homeowner has a reverse mortgage on their home that was entered into from 2011 through 2016, the owner must also hold at least 40% equity in the home at the time they file their application for deferral. They would not be eligible for deferral if the reverse mortgage were entered into after 2016. If an owner had previously been inactivated from deferral due to a 2011-2016 reverse mortgage, they would be able to re-apply for active deferral and eligibility would be reconsidered given the HB 2587 criteria for  2011-2016 reverse mortgages and the homeowner equity at time of the re-application.
  3. The 40% equity criteria applicable to applications with 2011-2016 reverse mortgages is to be calculated as of the date the homeowner files their application for deferral. The equity criteria would also be applicable to date of re-application filing where the account had for some reason been inactivated from deferral and the owner wants to re-apply for deferral activation and they have a 2011-2016 reverse mortgage. It does not appear to require recalculation in later years (or for future deferral recertification) otherwise.

This new change is going to open many doors for seniors who otherwise would not have been able to access their home equity for retirement funding. Now, many Oregon seniors are going to be able to use the home equity they have built to live a more comfortable and enjoyable life.

Several times people have came to us for assistance and we were unable to help them due to the deferred taxes. We aim to keep seniors in their homes for longer, fuller, more enjoyable lives and this new bill follows suit with those ideals. We hope to be able to help many seniors access their equity to lift the financial burdens that have so many bogged down.

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Northwest Reverse Mortgage, LLC. NMLS 183-4787. Equal Housing Lender. Credit on approval. Terms subject to change without notice. Not a commitment to lend. Contents not provided by, or approved by FHA, HUD or any other government agency. All potential tax benefits should be verified with a professional licensed tax advisor. NMLS Consumer Access

At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; the loan balance grows over time and interest is charged on the outstanding balance; the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; interest on a reverse mortgage is not tax deductible until the borrower makes partial or full re-payment.