Borrowing from 401K vs. PMI

[joec]

I’ve borrowed from my 401k before as well. I think in terms of the cost of getting money, this isn’t a bad way to do it. For a home purchase, I think you could also give yourself longer loan terms as well to stretch out your payments if you need to.

I did notice various small fees they charge, but in the grand scheme of things…for 50k, there aren’t many cheaper options to access money. Especially since you’re paying the loan interest back to your account.

If someone mentions it, in regards to double taxation, here is a write up about that as well (there isn’t any):
http://www.mymoneyblog.com/better-example-against-double-taxation-of-401k-loans.html

Guaranteed savings interest is very low now so tapping any cash earning low returns and saving $300 on PMI or whatever it costs sounds like a good idea to me.

[AK]

Run the numbers very carefully. Keep in mind:

1. You’re paying back the 401k loan in after-tax dollars.

2. The interest paid on the 401k loan isn’t tax-deductible.

3. If you change jobs or get laid off, you may have to pay back the loan in a lump sum or pay $$$ in taxes and penalties.

4. PMI isn’t forever. In the event that prices go up even modestly you should be able to get it removed after a few years.

5. There are lots of PMI options, including single-premium MI.

6. Oh wow, I just realized that I get to deduct my VA funding fee. Ka-ching!

[AK]

Run the numbers very carefully. Keep in mind:

1. You’re paying back the 401k loan in after-tax dollars.

2. The interest paid on the 401k loan isn’t tax-deductible.

3. If you change jobs or get laid off, you may have to pay back the loan in a lump sum or pay $$$ in taxes and penalties.

4. PMI isn’t forever. In the event that prices go up even modestly you should be able to get it removed after a few years.

5. There are lots of PMI options, including single-premium MI.

6. Oh wow, I just realized that I get to deduct my VA funding fee. Ka-ching!

[AK]

Run the numbers very carefully. Keep in mind:

1. You’re paying back the 401k loan in after-tax dollars.

2. The interest paid on the 401k loan isn’t tax-deductible.

3. If you change jobs or get laid off, you may have to pay back the loan in a lump sum or pay $$$ in taxes and penalties.

4. PMI isn’t forever. In the event that prices go up even modestly you should be able to get it removed after a few years.

5. There are lots of PMI options, including single-premium MI.

6. Oh wow, I just realized that I get to deduct my VA funding fee. Ka-ching!

[AK]

Run the numbers very carefully. Keep in mind:

1. You’re paying back the 401k loan in after-tax dollars.

2. The interest paid on the 401k loan isn’t tax-deductible.

3. If you change jobs or get laid off, you may have to pay back the loan in a lump sum or pay $$$ in taxes and penalties.

4. PMI isn’t forever. In the event that prices go up even modestly you should be able to get it removed after a few years.

5. There are lots of PMI options, including single-premium MI.

6. Oh wow, I just realized that I get to deduct my VA funding fee. Ka-ching!

[AK]

Run the numbers very carefully. Keep in mind:

1. You’re paying back the 401k loan in after-tax dollars.

2. The interest paid on the 401k loan isn’t tax-deductible.

3. If you change jobs or get laid off, you may have to pay back the loan in a lump sum or pay $$$ in taxes and penalties.

4. PMI isn’t forever. In the event that prices go up even modestly you should be able to get it removed after a few years.

5. There are lots of PMI options, including single-premium MI.

6. Oh wow, I just realized that I get to deduct my VA funding fee. Ka-ching!

[temeculaguy]

Just do all the math and see what works out best, it can vary based on your individual tax situation and if you buy the house that tax situation will change as well. Get last years tax software, get your taxes then run the two scenarios, check the fees and see which scenario wins.

Also factor in that PMI is deductable now.

Normally I would tell people to leave their retirement money alone but I like your numbers, a couple of 30 year olds sitting on 300k, nice work. Obviously you are savers, you’ll get it back. Most people need to be kept from their retirement savings because they will blow it, most 30 year olds are just getting into the groove of saving if at all. The 20’s are a hard age financially, it’s often spent partly still in school, then in entry level positions and it is those years you need to buy stuff because you don’t really have anything. Plus when you go from zero income to something decent, it vanishes in that lottery winning feeling, at least it did for me. I’m just guessing here, but if 50K is 10%, then you are buying a house for about 500k, for a 30 y.o. to buy a house and they have already saved 60% of the total cost essentially, that is such a stable lifestyle. I’m proud of you.

[temeculaguy]

Just do all the math and see what works out best, it can vary based on your individual tax situation and if you buy the house that tax situation will change as well. Get last years tax software, get your taxes then run the two scenarios, check the fees and see which scenario wins.

Also factor in that PMI is deductable now.

Normally I would tell people to leave their retirement money alone but I like your numbers, a couple of 30 year olds sitting on 300k, nice work. Obviously you are savers, you’ll get it back. Most people need to be kept from their retirement savings because they will blow it, most 30 year olds are just getting into the groove of saving if at all. The 20’s are a hard age financially, it’s often spent partly still in school, then in entry level positions and it is those years you need to buy stuff because you don’t really have anything. Plus when you go from zero income to something decent, it vanishes in that lottery winning feeling, at least it did for me. I’m just guessing here, but if 50K is 10%, then you are buying a house for about 500k, for a 30 y.o. to buy a house and they have already saved 60% of the total cost essentially, that is such a stable lifestyle. I’m proud of you.

[temeculaguy]

Just do all the math and see what works out best, it can vary based on your individual tax situation and if you buy the house that tax situation will change as well. Get last years tax software, get your taxes then run the two scenarios, check the fees and see which scenario wins.

Also factor in that PMI is deductable now.

Normally I would tell people to leave their retirement money alone but I like your numbers, a couple of 30 year olds sitting on 300k, nice work. Obviously you are savers, you’ll get it back. Most people need to be kept from their retirement savings because they will blow it, most 30 year olds are just getting into the groove of saving if at all. The 20’s are a hard age financially, it’s often spent partly still in school, then in entry level positions and it is those years you need to buy stuff because you don’t really have anything. Plus when you go from zero income to something decent, it vanishes in that lottery winning feeling, at least it did for me. I’m just guessing here, but if 50K is 10%, then you are buying a house for about 500k, for a 30 y.o. to buy a house and they have already saved 60% of the total cost essentially, that is such a stable lifestyle. I’m proud of you.

[temeculaguy]

Just do all the math and see what works out best, it can vary based on your individual tax situation and if you buy the house that tax situation will change as well. Get last years tax software, get your taxes then run the two scenarios, check the fees and see which scenario wins.

Also factor in that PMI is deductable now.

Normally I would tell people to leave their retirement money alone but I like your numbers, a couple of 30 year olds sitting on 300k, nice work. Obviously you are savers, you’ll get it back. Most people need to be kept from their retirement savings because they will blow it, most 30 year olds are just getting into the groove of saving if at all. The 20’s are a hard age financially, it’s often spent partly still in school, then in entry level positions and it is those years you need to buy stuff because you don’t really have anything. Plus when you go from zero income to something decent, it vanishes in that lottery winning feeling, at least it did for me. I’m just guessing here, but if 50K is 10%, then you are buying a house for about 500k, for a 30 y.o. to buy a house and they have already saved 60% of the total cost essentially, that is such a stable lifestyle. I’m proud of you.

[temeculaguy]

Just do all the math and see what works out best, it can vary based on your individual tax situation and if you buy the house that tax situation will change as well. Get last years tax software, get your taxes then run the two scenarios, check the fees and see which scenario wins.

Also factor in that PMI is deductable now.

Normally I would tell people to leave their retirement money alone but I like your numbers, a couple of 30 year olds sitting on 300k, nice work. Obviously you are savers, you’ll get it back. Most people need to be kept from their retirement savings because they will blow it, most 30 year olds are just getting into the groove of saving if at all. The 20’s are a hard age financially, it’s often spent partly still in school, then in entry level positions and it is those years you need to buy stuff because you don’t really have anything. Plus when you go from zero income to something decent, it vanishes in that lottery winning feeling, at least it did for me. I’m just guessing here, but if 50K is 10%, then you are buying a house for about 500k, for a 30 y.o. to buy a house and they have already saved 60% of the total cost essentially, that is such a stable lifestyle. I’m proud of you.

[CafeMoto]

I talked with “home loan Sheldon” recommended by piggs here and borrowing from my 401k is exactly what he told me to do if I moved ahead (last year). Would not hurt to look him up and chat with him. He was insightful and not pushy. http://www.homeloansheldon.com/401kforDownpayment

[CafeMoto]

I talked with “home loan Sheldon” recommended by piggs here and borrowing from my 401k is exactly what he told me to do if I moved ahead (last year). Would not hurt to look him up and chat with him. He was insightful and not pushy. http://www.homeloansheldon.com/401kforDownpayment

[CafeMoto]

I talked with “home loan Sheldon” recommended by piggs here and borrowing from my 401k is exactly what he told me to do if I moved ahead (last year). Would not hurt to look him up and chat with him. He was insightful and not pushy. http://www.homeloansheldon.com/401kforDownpayment

[CafeMoto]

I talked with “home loan Sheldon” recommended by piggs here and borrowing from my 401k is exactly what he told me to do if I moved ahead (last year). Would not hurt to look him up and chat with him. He was insightful and not pushy. http://www.homeloansheldon.com/401kforDownpayment

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