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re: Is borrowing against your 401(k) for a home down payment a good idea?
Posted on 12/14/13 at 5:58 pm to GoHoGsGo06
Posted on 12/14/13 at 5:58 pm to GoHoGsGo06
When I took a 401k loan, I could borrow half of the balance but only up to 50k.
Loan term for me was 5 years, and payments were deducted out of each paycheck. If I had left the company, I would have had to pay back the remaining loan balance or pay an early withdrawal penalty for income tax (marginal rate plus 10% penalty).
For me it worked out great to source quick cash for an investment, but I could have covered the shortfall early if I had left the company.
Personally I would not suggest using it for a down payment.
In before :payingbackloanwithaftertaxdollarsderp:
Loan term for me was 5 years, and payments were deducted out of each paycheck. If I had left the company, I would have had to pay back the remaining loan balance or pay an early withdrawal penalty for income tax (marginal rate plus 10% penalty).
For me it worked out great to source quick cash for an investment, but I could have covered the shortfall early if I had left the company.
Personally I would not suggest using it for a down payment.
In before :payingbackloanwithaftertaxdollarsderp:
1
Posted on 12/14/13 at 8:33 pm to Bayou Tiger
One drawback that people fail to realize when borrowing against a 401k....if your company goes out of business, gets acquired or you get terminated/released....the balance of the loan is due within 30 days or it becomes taxable income!!!
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