Well, I'm in a bit of tax debt due to being punished for being self employed for years.

Me and the wife bought our house a year and a half ago. In the mortgage agreement, it states that we can't pay off or refinance the house for 3 years. When it appraised, it was valued at $4500 more than we payed. On top of that, we've installed ceramic tile floors in the bathroom, kitchen and dining room, and wood floors in the living room. On top of that, lots of fresh paint. So I know we've built equity into the place.

Anyway, I've been thinking about applying for a home equity loan with a local bank we've got our cars financed through. The way I see it, with the penalties and interest with the IRS, we'd be much better off owing that money to the bank.

My only hesitation, is that I'm not keen on getting a second mortgage on the house so soon.

I'm not looking at borrowing alot, but still wonder if this is a good idea.

Your thoughts?

At least you can write off the interest on future taxes.

Penalties and interest on a tax debt are horrendous.

Any type of bank loan would be preferable. Just don't tell them you want the money to pay a tax debt. They don't loan money for that sort of thing.

The cheapest form of loan is a bank note. It is more of a short term thing, but have you considered that? A one year note would not cost much. you would probably have to tie the house to it, but it would not involve fees to assess the house or bring the title up to date.

I'm self employed and carry notes frequently. the only justification I offer for wanting one is "short term cash flow issues".

First of all, how much do you need.  If it is a small amount a signature loan aka personal loan may be best.

If you go the home equity route you have a lot more options.  You would be best paying off all credit cards and vehicles you my have along with the tax debt.  The rate right now at the credit union I work at is as low as 4.75%  the signature loan rate is 11.5

If you belong to a bank expect it to be higher.

And last, home equity loans require more work and more stipulations, but can save you a lot of money if you use it correctly.

I'm in the same boat...I'm looking at a home equity line of credit...I can pay off the IRS in one fell swoop, AND deduct the interest.  I can't see much down side to it, and lord knows the penalty and interest on the tax is gonna keep growing.