Borrowing out of 401k for Primary Residence Mortgage

[2011GT]

The home is only an investment if you borrow from your 401k?

No? That's not what I'm saying. the money from the 401k is moving from one retirement fund to equity in a home. Your also lowering your monthly payment and paying much less interest over the lifetime of the mortgage.

[slow99]

No? That's not what I'm saying. the money from the 401k is moving from one retirement fund to equity in a home. Your also lowering your monthly payment and paying much less interest over the lifetime of the mortgage.

So the exercise is to compare all potential sources of funding. In virtually 100% of the cases, the 401k loan is the most costly.

[Ruffdaddy]

Cash that bitch out! World ends in 3 months anyways!!!!

[2011GT]

So the exercise is to compare all sources of funding. In virtually 100% of the cases, the 401k loan is the most costly.

I don't know what his savings is like. All his money may be tied up in the 401k. You can't get a bank loan to use as a down payment on a home. So I'm not sure what other options he has. Maybe he has some Microsoft stock from the 80s, lol.

[talisman]

I've got plenty of options, just would like to keep cash readily available for emergencies, and not cash out any stocks. I'm also not looking at this as any type of investment, especially after what has happened in the financial and real estate markets in the last 6 years. My long term goal is to eliminate any type of rent or mortgage payment, and do it as quickly as possible.

[kingjason]

SVT and Nate both would agree with Slow99 I think. I asked about putting more down then 3 percent and both kind of led me to believe that money is so cheap to borrow right now it would be better to get in on the low side and then just pay it off as fast as I could if that was my goal. I am looking at 3 to 5 years paying this thing off now that the wife is working. Screw the man!!

[GE]

Bad idea. The only time I've ever taken a loan out on my 401k was for like $5k, but I had it all paid back within 2-3 months.

[Trip McNeely]

Call Western Sky for an 89% APR loan. lol

[FreightTrain]

My opinion is don't do it. Money is just way to cheap these days. Even if you have to pay pmi that's only about $50 to $70 a month for what your going to be borrowing. Plus I think that's even tax deductible these days. With rates under 4% add me to the list that says borrow as much as you feel comfortable with and take as long as you can to pay it back.

[BlackGT]

What rate of return are you getting currently on your 401k investments? If its less than the interest you will be paying yourself, then I don't see it as being a bad thing to borrow and pay yourself back...

[whitetrash]

I recently took a small loan out on mine. It didn't affect the interest building from the amount before the loan. What interest was in the loan went back into the account.

[TX_92_Notch]

Can you afford the extra payment while you're paying back your 401k loan? You'll have the house payment plus the 401k loan payment, meaning your house is costing you considerably more than you want it to for the first few years while you're paying back the loan.

Everything I've ever read or heard about 401k loans is generally negative. I can't tell you why, but you can Google it just like I can.

[rray]

Your paying taxes on it twice. That's the bad of it. The money you put back in is being taxed and at the end of the year when you file taxes you have to claim it, which you will be taxed again.

[Nate]

SVT and Nate both would agree with Slow99 I think. I asked about putting more down then 3 percent and both kind of led me to believe that money is so cheap to borrow right now it would be better to get in on the low side and then just pay it off as fast as I could if that was my goal. I am looking at 3 to 5 years paying this thing off now that the wife is working. Screw the man!!

This Nate agrees too. Just a humble finance major.

Eric - put the smaller down payment down and leave the 401k alone.

[SS Junk]

^^^
Yes. 401k is a retirement acct, not a piggybank.

Yep. Don't do it.