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How to Use Home Equity to Pay Your Taxes in Kansas City

How to Use Home Equity to Pay Your Taxes, from Kansas City Bankers

Budgeting / May 15, 2020

Believe it or not, when it comes time to pay your taxes, you could use your home equity if you’re short on funds. Many of our customers at Cornerstone Bank come to us for options on how to afford their taxes and are surprised that home equity can be a great tool. 

While this option may not be for everyone, we want all of our customers to understand their options when it comes to their own financial well-being. Read on to learn more about how to use your home equity to pay your taxes. 

What is equity?

Before we go further, let’s talk a little bit about the ins and outs of equity. Simply speaking, equity is the difference between what you owe on your mortgage and how much your home is worth. So if your home is worth $100,000 and you owe $80,000 on your mortgage, your home’s equity is $20,000. You can also borrow equity for a variety of expenses such as home renovations, college tuitions, and paying your taxes.

As time passes, you can increase your home equity in two main ways:

  1. Paying off your mortgage
  2. Increasing the value of your home

How to Use Home Equity: Tips from Kansas City Financial Experts →

How you can use equity during tax season 

Even though you have a little extra time to file your 2019 taxes, it’s never too early to start planning. In times when you owe a little more money than expected, the IRS does offer payment plans. However, some of the plans come with set up fees that range from $31 to $149. 

On the other hand, it may be better for you to use your home equity as a low-interest option to borrow money and pay off your taxes without IRS fees. Make sure you consult a tax advisor before making the final decision. 

While there are three ways you can borrow money using equity, most people opt for either a home equity loan or home equity line of credit (HELOC). However at Cornerstone Bank, we only offer HELOCs. 

A home equity loan acts as a second mortgage that you pay on top of your current mortgage. A HELOC works similar to a credit card with the limit based on how much equity your home has. 

If you want a lump sum to pay your taxes at once, you can choose a home equity loan (it’s best to find one with a fixed interest rate). You can also choose a line of credit, especially if you have a good credit score. With a HELOC, you only have to pay back the amount of money you spend, which tends to be a cheaper alternative for some people. 

Our bankers at Cornerstone Bank are here to help. 

Since 2001, Cornerstone Bank has put our customers first, and that means giving them the best banking has to offer. We don’t believe in simple banking; rather, we go above and beyond to help our customers make their money work for them. 

For more information about how to use your home equity to pay taxes, visit our Overland Park office or give us a call at 913-239-8100 to let us know how we can help.

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