Tapping 401(k) for Purchase?
I’ve read some of the pros and lots of cons of dipping into your 401(k) for purchasing a home. I wanted to know if anyone on this forum went this route or if they know of anyone who has? Do they have any regrets? Would they recommend it? Any information/advice about 401(k)s and purchasing a…
I’ve read some of the pros and lots of cons of dipping into your 401(k) for purchasing a home. I wanted to know if anyone on this forum went this route or if they know of anyone who has? Do they have any regrets? Would they recommend it? Any information/advice about 401(k)s and purchasing a home welcomed!
Thanks in advance.
It really is a good advantage if you have money invested in a 401k account, enough to buy you a house for preferably cash. For instance, assume you have $150k cash in your 401k, experts suggest rolling it over to a Self directed IRA from which you can use the funds (100% of the funds) to buy a house. However, the percentage of money you should take out from your self directed IRA depends on the amount of savings you have.
Once you have a self-directed IRA set up, consider purchasing actual physical real estate by withdrawing funds from your IRA to make a down payment on the home, and get a mortgage, or if you have enough funds, purchase the entire home by paying 100% cash.
Source: http://www.research401krollover.com/
You are not allowed to take a mortgage from your IRA, like how you would take out a loan from your 401(k) and pay it back in a certain period of time. When purchasing property from your IRA, remember this key point that all gains you make from this property such as rental income, capital gains, etc must be contributed back in to your IRA.
It’s great to take advantage of the IRA for first time home purchase and if it is a Roth IRA then no penalty or taxes on it. FOr your 401 K it’s also great that you can take out a loan. Either way it’s a good way of financing the purchase- I did it this way and was fortunate enough to catch up on my retirement savings and far surpass what I had used in about 5 years.
I borrowed from my 401k and changed jobs a yr later..i did not have to pay back the loan..i continued to make payments directly to T Rowe. Its specific to the t&cs of your plan.
Your 401K plan administrator will tell you your company’s rules/restrictions for borrowing against your account to purchase your first home. In my case, my purchase agreement could not have a closing date more than 90 days after execution of same. That’s just one example. Additionally, I agree w/panda10 @ 152pm:
“If you take the loan- and you’re still able to fund your 401k exactly the same as before AND can repay the loan- then it may not be a bad idea.”
open a loan line against 401K as collateral.
@lechacal – I dont have to tap into the 401(k). It was just a thought incase more $ is needed. Great responses from all!
I would say absolutely no.
But perhaps if income prop (multi-family) maybe..but only maybe
If you have to tap into your 401(k) to buy, should you really be buying?
I borrowed from my 401K and then changed jobs and had to pay it back immediately. Even if you don’t lose your job, the loans can handcuff you to your current job if you wanted to make a change.