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

[(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.

[moneymaker]

There are 3 reasons to do it,ok maybe 4.

1.interest free loan
2.if you default it does not affect credit score and the repayment may not show on credit report hence may not affect debt/income ratio.
3.not sure about refi but on purchase loan may extend out to 30 years.
4.if the market goes down with house prices, pay back will be buying stock @ cheaper price.Obviously this will not be true over 30 years.

[moneymaker]

There are 3 reasons to do it,ok maybe 4.

1.interest free loan
2.if you default it does not affect credit score and the repayment may not show on credit report hence may not affect debt/income ratio.
3.not sure about refi but on purchase loan may extend out to 30 years.
4.if the market goes down with house prices, pay back will be buying stock @ cheaper price.Obviously this will not be true over 30 years.

[moneymaker]

There are 3 reasons to do it,ok maybe 4.

1.interest free loan
2.if you default it does not affect credit score and the repayment may not show on credit report hence may not affect debt/income ratio.
3.not sure about refi but on purchase loan may extend out to 30 years.
4.if the market goes down with house prices, pay back will be buying stock @ cheaper price.Obviously this will not be true over 30 years.

[moneymaker]

There are 3 reasons to do it,ok maybe 4.

1.interest free loan
2.if you default it does not affect credit score and the repayment may not show on credit report hence may not affect debt/income ratio.
3.not sure about refi but on purchase loan may extend out to 30 years.
4.if the market goes down with house prices, pay back will be buying stock @ cheaper price.Obviously this will not be true over 30 years.

[moneymaker]

There are 3 reasons to do it,ok maybe 4.

1.interest free loan
2.if you default it does not affect credit score and the repayment may not show on credit report hence may not affect debt/income ratio.
3.not sure about refi but on purchase loan may extend out to 30 years.
4.if the market goes down with house prices, pay back will be buying stock @ cheaper price.Obviously this will not be true over 30 years.

[Author]

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