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re: Is borrowing against your 401(k) for a home down payment a good idea?
Posted on 12/15/13 at 1:33 am to cwill
Posted on 12/15/13 at 1:33 am to cwill
quote:
Terrible idea IMV...it speaks to you either buying too much house or not being in the financial situation to be buying a house.
Not really. I'd like to think I am pretty conservative when it comes to personal finances. Real estate in California is so expensive, it is hard to come up with 20% downpayment for your home. This is our first home and the cheapest condos we can get in good school districts and good areas runs upwards of $600K. The home we are looking at is $590K. Our original budget was $500K and we have about $90K in liquid savings. But after having seen homes for the past 2 months, we have come to the realization that we need to increase our budget, and the homes we like at are in the $590-600K range. This means we are short about ~$30K that I need to be able to put 20% ($120K) down again. I am hoping I can borrow that $30K from my 401(K) instead of getting a HELOC or paying a PMI.
3
Posted on 12/15/13 at 9:46 am to saintforlife1
Consider the gap this would create in your 401k. You will pay yourself interest, but it will probably be around half of what your 401k returns. That gap could exceed the cost of PMI or whatever other means you have to borrow the $30k.
Posted on 12/15/13 at 12:37 pm to saintforlife1
Can you borrow from your parents? This is the only situation where I find that acceptable.
Posted on 12/15/13 at 6:06 pm to saintforlife1
quote:
quote:
Terrible idea IMV...it speaks to you either buying too much house or not being in the financial situation to be buying a house.
Not really. I'd like to think I am pretty conservative when it comes to personal finances. Real estate in California is so expensive, it is hard to come up with 20% downpayment for your home.
It sounds like you've already made up your mind and you're going to do it regardless of what anyone here has to say. For what its worth, I wouldn't do it. You're playing with snakes.
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