Why tax debt is different
Most debts have a set rate. Tax debt can grow in more than one way. Penalties for filing or paying late can stack on top of interest, and both may keep building until the balance is paid.
Tax agencies also have collection powers other creditors don't. That's why many people want the debt gone quickly, and why home equity comes up.
Look at payment plans first
The IRS and many state tax agencies offer payment plans for people who can't pay in full. Penalties and interest may still apply, but often at a pace you can manage, and without putting your house behind the debt.
In some hardship cases, an agency may accept less than the full amount. A tax professional can tell you whether any of these options fit your situation.
If a tax lien is on your home
When tax debt goes unpaid long enough, the agency may record a lien against your property. A lender will see it during the title search.
In most cases, the lien needs to be paid off before or at closing for a new loan to go forward. CapCenter's offer details note that other liens behind the first mortgage may be paid off before or as part of a home equity loan closing. Your loan consultant can explain what that would look like for you.
When a home equity loan can make sense
- The balance is large and still growing with penalties and interest
- You have steady income and room in your budget for a new payment
- You can borrow at least $50,000, CapCenter's minimum
- You've filed and you're current on this year's taxes, so new debt isn't building
When to pause
- You haven't yet talked with a tax professional about payment plans or relief
- The tax bill came from a business or income that may not continue
- You'd need the longest term just to afford the payment
- You're not sure you'll owe again next year
Keep it from happening again
Once the debt is paid, look at what caused it. If you're self-employed or have income without withholding, setting aside money each month for estimated taxes can help. If you're an employee, check your withholding.
Clearing old tax debt only helps if new tax debt doesn't take its place.
How CapCenter can help
CapCenter offers fixed-rate home equity loans from $50,000 to $250,000 on single-family primary residences and second homes, with ZERO Closing Costs (restrictions apply; see Offer details). You keep your first mortgage and get one set payment for the new loan.
