Does it make sense to borrow money out of 401K to refinance?

[NicMM]

Yes, she is trying to get it to below $546,250 in San Diego county from a Jumbo.

[an]

[quote=NicMM]I don’t agree with using credit cards as the source of fund. Because,
1. It’s hard to get $40K in one or two 0% credit cards.
2. Such big balance would drag down your credit score and therefore negatively influence the mortgage rate you can get.
3. You have to find the next available 0 cards in a year again and again.

If she loses her job in 5 years (before pays back the 401K loan), she can chose to take the rest of the loan out as an early distribution and pay income tax of that portion. Without a job, I guess her tax brake would be lower than now.[/quote]
I never said it would be over 1 or 2 cards. But if you get 4 cards and do balance transfer on $10k each card, that’s $40k. Depend how much credit she has available and how much credit she can get from those new credit cards, it might not pull her credit down that much. It’s just an option if you’re able to take advantage of it. It’s free money.

[an]

[quote=NicMM]I don’t agree with using credit cards as the source of fund. Because,
1. It’s hard to get $40K in one or two 0% credit cards.
2. Such big balance would drag down your credit score and therefore negatively influence the mortgage rate you can get.
3. You have to find the next available 0 cards in a year again and again.

If she loses her job in 5 years (before pays back the 401K loan), she can chose to take the rest of the loan out as an early distribution and pay income tax of that portion. Without a job, I guess her tax brake would be lower than now.[/quote]
I never said it would be over 1 or 2 cards. But if you get 4 cards and do balance transfer on $10k each card, that’s $40k. Depend how much credit she has available and how much credit she can get from those new credit cards, it might not pull her credit down that much. It’s just an option if you’re able to take advantage of it. It’s free money.

[an]

[quote=NicMM]I don’t agree with using credit cards as the source of fund. Because,
1. It’s hard to get $40K in one or two 0% credit cards.
2. Such big balance would drag down your credit score and therefore negatively influence the mortgage rate you can get.
3. You have to find the next available 0 cards in a year again and again.

If she loses her job in 5 years (before pays back the 401K loan), she can chose to take the rest of the loan out as an early distribution and pay income tax of that portion. Without a job, I guess her tax brake would be lower than now.[/quote]
I never said it would be over 1 or 2 cards. But if you get 4 cards and do balance transfer on $10k each card, that’s $40k. Depend how much credit she has available and how much credit she can get from those new credit cards, it might not pull her credit down that much. It’s just an option if you’re able to take advantage of it. It’s free money.

[an]

[quote=NicMM]I don’t agree with using credit cards as the source of fund. Because,
1. It’s hard to get $40K in one or two 0% credit cards.
2. Such big balance would drag down your credit score and therefore negatively influence the mortgage rate you can get.
3. You have to find the next available 0 cards in a year again and again.

If she loses her job in 5 years (before pays back the 401K loan), she can chose to take the rest of the loan out as an early distribution and pay income tax of that portion. Without a job, I guess her tax brake would be lower than now.[/quote]
I never said it would be over 1 or 2 cards. But if you get 4 cards and do balance transfer on $10k each card, that’s $40k. Depend how much credit she has available and how much credit she can get from those new credit cards, it might not pull her credit down that much. It’s just an option if you’re able to take advantage of it. It’s free money.

[an]

[quote=NicMM]I don’t agree with using credit cards as the source of fund. Because,
1. It’s hard to get $40K in one or two 0% credit cards.
2. Such big balance would drag down your credit score and therefore negatively influence the mortgage rate you can get.
3. You have to find the next available 0 cards in a year again and again.

If she loses her job in 5 years (before pays back the 401K loan), she can chose to take the rest of the loan out as an early distribution and pay income tax of that portion. Without a job, I guess her tax brake would be lower than now.[/quote]
I never said it would be over 1 or 2 cards. But if you get 4 cards and do balance transfer on $10k each card, that’s $40k. Depend how much credit she has available and how much credit she can get from those new credit cards, it might not pull her credit down that much. It’s just an option if you’re able to take advantage of it. It’s free money.

[BGinRB]

[quote=flu]There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration.[/quote]
I was told that depends on the program administrator’s rules. It often does.
[quote=flu]I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.[/quote]
Same as the above. Our program administrator allows simultanous payoff and contributions. I.e. you can add to your 401k account before you pay off the loan. One of my guys is doing it.

[BGinRB]

[quote=flu]There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration.[/quote]
I was told that depends on the program administrator’s rules. It often does.
[quote=flu]I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.[/quote]
Same as the above. Our program administrator allows simultanous payoff and contributions. I.e. you can add to your 401k account before you pay off the loan. One of my guys is doing it.

[BGinRB]

[quote=flu]There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration.[/quote]
I was told that depends on the program administrator’s rules. It often does.
[quote=flu]I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.[/quote]
Same as the above. Our program administrator allows simultanous payoff and contributions. I.e. you can add to your 401k account before you pay off the loan. One of my guys is doing it.

[BGinRB]

[quote=flu]There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration.[/quote]
I was told that depends on the program administrator’s rules. It often does.
[quote=flu]I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.[/quote]
Same as the above. Our program administrator allows simultanous payoff and contributions. I.e. you can add to your 401k account before you pay off the loan. One of my guys is doing it.

[BGinRB]

[quote=flu]There might be an interesting angle too if you borrow from your 401k and get laidoff. I don’t know if it triggers any loan repayment acceleration.[/quote]
I was told that depends on the program administrator’s rules. It often does.
[quote=flu]I would check that out. Also, if you borrow from your 401k, contributions go toward paying off your loan balance and not 401k future contributions.[/quote]
Same as the above. Our program administrator allows simultanous payoff and contributions. I.e. you can add to your 401k account before you pay off the loan. One of my guys is doing it.

[(former)FormerSanDiegan]

In this case I think it makes sense to borrow the 40K for 5 years in order to get the mortgage down to 5% as opposed to 6%.

I would do it.

From payment 1 she is paying less interest.
From payment 1 her principal paydown is accelerated. She will owe less overall at any point in the future because she is paying down the 40k over a shorter time frame.

The downside is that she may have to pay the 401k loan is she switches jobs or pay a penalty and taxes. Although some 401k programs allow ex-employees to continue paying the loan as long as they hold their funds in the 401k after leaving the eomployer.

[(former)FormerSanDiegan]

In this case I think it makes sense to borrow the 40K for 5 years in order to get the mortgage down to 5% as opposed to 6%.

I would do it.

From payment 1 she is paying less interest.
From payment 1 her principal paydown is accelerated. She will owe less overall at any point in the future because she is paying down the 40k over a shorter time frame.

The downside is that she may have to pay the 401k loan is she switches jobs or pay a penalty and taxes. Although some 401k programs allow ex-employees to continue paying the loan as long as they hold their funds in the 401k after leaving the eomployer.

[(former)FormerSanDiegan]

In this case I think it makes sense to borrow the 40K for 5 years in order to get the mortgage down to 5% as opposed to 6%.

I would do it.

From payment 1 she is paying less interest.
From payment 1 her principal paydown is accelerated. She will owe less overall at any point in the future because she is paying down the 40k over a shorter time frame.

The downside is that she may have to pay the 401k loan is she switches jobs or pay a penalty and taxes. Although some 401k programs allow ex-employees to continue paying the loan as long as they hold their funds in the 401k after leaving the eomployer.

[(former)FormerSanDiegan]

In this case I think it makes sense to borrow the 40K for 5 years in order to get the mortgage down to 5% as opposed to 6%.

I would do it.

From payment 1 she is paying less interest.
From payment 1 her principal paydown is accelerated. She will owe less overall at any point in the future because she is paying down the 40k over a shorter time frame.

The downside is that she may have to pay the 401k loan is she switches jobs or pay a penalty and taxes. Although some 401k programs allow ex-employees to continue paying the loan as long as they hold their funds in the 401k after leaving the eomployer.

[Author]

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