Borrowing from 401K vs. PMI

[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

[scaredyclassic]

I don’t see a downside or tax implications … if the money is just on cash in 401k and you only wouldve had pmi a year, you’re getting a guaranteed return on your money of the pmi paid minus any tax ded u woulda had. If pmi is no more u can pay back the Loan to the 401( in my case we had the cash on hand and in the acct but just wanted to do something w retirement $ other than 401k available shares. Allowedm
to keep cash in various commodity metal rugs and not feel pinched for a savings fund . The primary risk as I see it is not being able to pay off the loan in a pinch but minus that risk it looks smart for certain types…

[scaredyclassic]

I don’t see a downside or tax implications … if the money is just on cash in 401k and you only wouldve had pmi a year, you’re getting a guaranteed return on your money of the pmi paid minus any tax ded u woulda had. If pmi is no more u can pay back the Loan to the 401( in my case we had the cash on hand and in the acct but just wanted to do something w retirement $ other than 401k available shares. Allowedm
to keep cash in various commodity metal rugs and not feel pinched for a savings fund . The primary risk as I see it is not being able to pay off the loan in a pinch but minus that risk it looks smart for certain types…

[scaredyclassic]

I don’t see a downside or tax implications … if the money is just on cash in 401k and you only wouldve had pmi a year, you’re getting a guaranteed return on your money of the pmi paid minus any tax ded u woulda had. If pmi is no more u can pay back the Loan to the 401( in my case we had the cash on hand and in the acct but just wanted to do something w retirement $ other than 401k available shares. Allowedm
to keep cash in various commodity metal rugs and not feel pinched for a savings fund . The primary risk as I see it is not being able to pay off the loan in a pinch but minus that risk it looks smart for certain types…

[scaredyclassic]

I don’t see a downside or tax implications … if the money is just on cash in 401k and you only wouldve had pmi a year, you’re getting a guaranteed return on your money of the pmi paid minus any tax ded u woulda had. If pmi is no more u can pay back the Loan to the 401( in my case we had the cash on hand and in the acct but just wanted to do something w retirement $ other than 401k available shares. Allowedm
to keep cash in various commodity metal rugs and not feel pinched for a savings fund . The primary risk as I see it is not being able to pay off the loan in a pinch but minus that risk it looks smart for certain types…

[scaredyclassic]

I don’t see a downside or tax implications … if the money is just on cash in 401k and you only wouldve had pmi a year, you’re getting a guaranteed return on your money of the pmi paid minus any tax ded u woulda had. If pmi is no more u can pay back the Loan to the 401( in my case we had the cash on hand and in the acct but just wanted to do something w retirement $ other than 401k available shares. Allowedm
to keep cash in various commodity metal rugs and not feel pinched for a savings fund . The primary risk as I see it is not being able to pay off the loan in a pinch but minus that risk it looks smart for certain types…

[ocrenter]

401k interest rate does pay back to your account. So it is a very credible way to access much needed money.

Even if PMI is deductible, remember you will only get a portion back (say 30% if that is your tax rate).

of course, the portion of the 401k you remove from the account will not be in the market generating passive income.

however, if we are merely looking at a one time loan that will be paid back rather quickly within 1-2 years, I don’t think that would be of significant issue for you. the stock market is unlikely to go anywhere dramatic over the next couple of years.

[ocrenter]

401k interest rate does pay back to your account. So it is a very credible way to access much needed money.

Even if PMI is deductible, remember you will only get a portion back (say 30% if that is your tax rate).

of course, the portion of the 401k you remove from the account will not be in the market generating passive income.

however, if we are merely looking at a one time loan that will be paid back rather quickly within 1-2 years, I don’t think that would be of significant issue for you. the stock market is unlikely to go anywhere dramatic over the next couple of years.

[ocrenter]

401k interest rate does pay back to your account. So it is a very credible way to access much needed money.

Even if PMI is deductible, remember you will only get a portion back (say 30% if that is your tax rate).

of course, the portion of the 401k you remove from the account will not be in the market generating passive income.

however, if we are merely looking at a one time loan that will be paid back rather quickly within 1-2 years, I don’t think that would be of significant issue for you. the stock market is unlikely to go anywhere dramatic over the next couple of years.

[ocrenter]

401k interest rate does pay back to your account. So it is a very credible way to access much needed money.

Even if PMI is deductible, remember you will only get a portion back (say 30% if that is your tax rate).

of course, the portion of the 401k you remove from the account will not be in the market generating passive income.

however, if we are merely looking at a one time loan that will be paid back rather quickly within 1-2 years, I don’t think that would be of significant issue for you. the stock market is unlikely to go anywhere dramatic over the next couple of years.

[ocrenter]

401k interest rate does pay back to your account. So it is a very credible way to access much needed money.

Even if PMI is deductible, remember you will only get a portion back (say 30% if that is your tax rate).

of course, the portion of the 401k you remove from the account will not be in the market generating passive income.

however, if we are merely looking at a one time loan that will be paid back rather quickly within 1-2 years, I don’t think that would be of significant issue for you. the stock market is unlikely to go anywhere dramatic over the next couple of years.

[joec]

Sheldon explained the point on having to repay the loan immediately or face early withdrawal penalties and income taxes. That is the biggest risk with this option I feel.

One thing not mentioned yet is that your loan isn’t on your credit report, at least it wasn’t in my case…

In the short term, if your job is stable, this is probably one of the lower cost of accessing a large amount of funds.

There’s also the 60 day rollover option as well with IRAs.

[joec]

Sheldon explained the point on having to repay the loan immediately or face early withdrawal penalties and income taxes. That is the biggest risk with this option I feel.

One thing not mentioned yet is that your loan isn’t on your credit report, at least it wasn’t in my case…

In the short term, if your job is stable, this is probably one of the lower cost of accessing a large amount of funds.

There’s also the 60 day rollover option as well with IRAs.

[joec]

Sheldon explained the point on having to repay the loan immediately or face early withdrawal penalties and income taxes. That is the biggest risk with this option I feel.

One thing not mentioned yet is that your loan isn’t on your credit report, at least it wasn’t in my case…

In the short term, if your job is stable, this is probably one of the lower cost of accessing a large amount of funds.

There’s also the 60 day rollover option as well with IRAs.

[joec]

Sheldon explained the point on having to repay the loan immediately or face early withdrawal penalties and income taxes. That is the biggest risk with this option I feel.

One thing not mentioned yet is that your loan isn’t on your credit report, at least it wasn’t in my case…

In the short term, if your job is stable, this is probably one of the lower cost of accessing a large amount of funds.

There’s also the 60 day rollover option as well with IRAs.

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