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re: Would it ever be ok to tap into 401k for a first time home purchase?
Posted on 10/29/15 at 2:17 pm to Herb484
Posted on 10/29/15 at 2:17 pm to Herb484
There are situations it can make sense. The answer to these question is rarely always "no, never" like some would have you believe. It depends on the circumstances.
If a 401k loan (in which you pay no taxes or penalties and the "interest" on the loan is actually paid back to yourself) helps you (for example) avoid PMI, get a lower interest rate, seize a great buying opportunity where time is of the essence, lower the mortgage amount at which you are paying the bank interest, etc. then there could certainly be circumstances where it makes sense. Now if the market takes off during the life of the 401k loan, then in hindsight it would have probably been a mistake. Conversely if the market is flat or worse during the loan, then the decision will look ingenious.
If a 401k loan (in which you pay no taxes or penalties and the "interest" on the loan is actually paid back to yourself) helps you (for example) avoid PMI, get a lower interest rate, seize a great buying opportunity where time is of the essence, lower the mortgage amount at which you are paying the bank interest, etc. then there could certainly be circumstances where it makes sense. Now if the market takes off during the life of the 401k loan, then in hindsight it would have probably been a mistake. Conversely if the market is flat or worse during the loan, then the decision will look ingenious.
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