Have the bank keep out the taxes.

When you take out the funds, some taxes will be withheld from the withdrawal. Any additional amount will be calculated and paid when you file your tax return in the year you take the early withdrawal.

Just like the tax withholding on your regular income, the amount of tax withheld may not be enough to cover the tax liability that will be incurred when you report the withdrawal on your tax return in the year the withdrawal is made. You will receive a 1099 showing the amount of the early withdrawal and the taxes that were withheld, and you'll use the 1099 to report it on your tax return.

Because this withdrawal will be added on to your regular income, it may be taxed at a higher rate, since your income for the year including the withdrawal may increase into the next tax bracket. In addition to the regular income taxes, If you're taking the withdrawal prior to age 59 1/2, you'll have an additional 10% tax penalty to pay, as well.

Don't forget the state income tax return, you may have state income taxes to pay as well.

You'll have to sit down and figure out just how much you'll need to withdraw to pay the house balance, and have enough left over set aside to cover any additional tax liability that may be owed.