How to Use Your Home Equity to Payoff Your Tax Debt
Do you owe tax money and are considering refinancing your mortgage to pay it off? The truth is nobody enjoys paying taxes, self-employed people or those who work on a contract basis are responsible for sending in their own taxes to the government each year and If you are one of those people, you know how much discipline it takes to set aside money over the time of the year to payoff your income tax dues.
If youve fallen behind in your tax payments, and you own a home, your home is at risk. If the tax man has already started to move against your home, then you do have a few options, you can file for bankruptcy, but this will destroy your credit rating.
The Governments tax department can also garnish your wages, freeze your accounts and seize the funds, and take away your assets. An excellent solution to solving your tax debt problems is refinancing your mortgage and getting a home equity loan to payoff the debt.
The edges may not be willing to provide a loan against the equity, already though the equity is there. However, there are private mortgage lenders who are willing to provide financing in this sort of situation. Instead of looking at your credit score, private lenders look at the loan-to-value (LTV) ratio of the character. If you have $250,000 in equity, taking out a $100,000 loan would nevertheless leave $150,000 in equity. If the houses value is $500,000, that leaves you with 30% equity, creating an LTV ratio of 70 percent, which is well within the criteria of most private lenders.
The home equity loan from the private lender will have a higher interest rate than you would with a home equity loan from a bank, this is because you represent a higher credit risk than someone with a good credit score. However, paying that higher rate is preferable to having the tax man take your home. Thats a consequence that no one wants to have to deal with. The tax man has all the strength in this situation. Ignoring him will not make your tax problems go away. Once your credit is back on track you can refinance your first mortgage and the home equity loan from the private lender into one new first mortgage.
If you are in tax debt, and you dont have any other resources other than your home equity, speak with a mortgage broker. He or she can connect you with their network of private lenders to help you find the loan that best suits your needs.