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(former)FormerSanDiegan
Participant[quote=RB132]Here is the problems I can see with borroing from 401k.
1, You may to pay back if you leave the job or lost the job. If you don’t pay, the pnalty comes.
2, You pay the interest with your after tax money. When you take it out after retire, you pay tax again.[/quote]
The fact that you pay it back with after-tax money is a red-herring. As is the Suze Orman “that money is taxed twice” advice.
If you borrow from another source outside your 401K you are taxed on what you pay back to that loan, too.
Consider the loan from the perspective of your 401k and from the perspective of you as an individual.
First, the 401k – From the 401k’s point of view, the loan is simply a short/intermediate bond that pays back at a rate of 3% or whatever the loan rate is. If you are happy with what amounts to a fixed income CD-like investment that pays about 3% or so for a portion of your 401 it might make sense. For most people, if they had taken a loan a year ago and put it in the mattress and paid it back today, their 401k would be ahead.
Second, from your point of view – If borrowing from your 401k at 3% and paying down a debt that is much higher (e.g. a 7% second) it can make sense. Also, as suggested above there is sometimes a non-linear improvement in loan terms in cases where you can use the 401k loan to eliminate PMI. In that case the equivalent return can be in the double digits.
Still, should you leave or lose your job, the early withdrawal penalty would be the major concern. The other concern would be that you would miss out on investment opportunities in the market, should it rally during the term of the loan.
Participant[quote=burnsr77]
i’m sure there’s more i can say, but i don’t think anyone here actually will want to read it.[/quote]I’d have to agree with you 100% on this point.
Participant[quote=burnsr77]
i’m sure there’s more i can say, but i don’t think anyone here actually will want to read it.[/quote]I’d have to agree with you 100% on this point.
Participant[quote=burnsr77]
i’m sure there’s more i can say, but i don’t think anyone here actually will want to read it.[/quote]I’d have to agree with you 100% on this point.
Participant[quote=burnsr77]
i’m sure there’s more i can say, but i don’t think anyone here actually will want to read it.[/quote]I’d have to agree with you 100% on this point.
Participant[quote=burnsr77]
i’m sure there’s more i can say, but i don’t think anyone here actually will want to read it.[/quote]I’d have to agree with you 100% on this point.
ParticipantSuppose at 2pm today esmith says that it will get warmer over the next 6-7 months. Now suppose we check the temperature at midnight and note that it has decreased. Obviously he must be wrong and a contrarian indicator.
ParticipantSuppose at 2pm today esmith says that it will get warmer over the next 6-7 months. Now suppose we check the temperature at midnight and note that it has decreased. Obviously he must be wrong and a contrarian indicator.
ParticipantSuppose at 2pm today esmith says that it will get warmer over the next 6-7 months. Now suppose we check the temperature at midnight and note that it has decreased. Obviously he must be wrong and a contrarian indicator.
ParticipantSuppose at 2pm today esmith says that it will get warmer over the next 6-7 months. Now suppose we check the temperature at midnight and note that it has decreased. Obviously he must be wrong and a contrarian indicator.
ParticipantSuppose at 2pm today esmith says that it will get warmer over the next 6-7 months. Now suppose we check the temperature at midnight and note that it has decreased. Obviously he must be wrong and a contrarian indicator.
ParticipantNice smoker analogy. It points out that the mortgage arena is not the only place where we subsidize stupidity (or bad judgment).
But, since you can comfortably afford the payment, I think it may be short-sighted to try to get a loan mod now, depending on the restrictions they might place. Why get a small chunk now, when you can get a larger concession in the future. It also will restrict your use of the property (e.g. you may not be able to rent it out if you want). I would wait another 12 months to see how far underwater you might ultimately be, then make a decision. Your best course might be to refinance or take a mod under Obama’s new program if it comes to fruition.
If I were you I wouldn’t walk now or take any loan mods until I can smell the bottom. Once you see how low things get you’ll get your best deal on a loan mod, refi, or whatever.
You should treat this exactly the same way as those who are renting with a comfortable monthly payment waiting for bottom before taking action and taking advantage of the market.
ParticipantNice smoker analogy. It points out that the mortgage arena is not the only place where we subsidize stupidity (or bad judgment).
But, since you can comfortably afford the payment, I think it may be short-sighted to try to get a loan mod now, depending on the restrictions they might place. Why get a small chunk now, when you can get a larger concession in the future. It also will restrict your use of the property (e.g. you may not be able to rent it out if you want). I would wait another 12 months to see how far underwater you might ultimately be, then make a decision. Your best course might be to refinance or take a mod under Obama’s new program if it comes to fruition.
If I were you I wouldn’t walk now or take any loan mods until I can smell the bottom. Once you see how low things get you’ll get your best deal on a loan mod, refi, or whatever.
You should treat this exactly the same way as those who are renting with a comfortable monthly payment waiting for bottom before taking action and taking advantage of the market.
ParticipantNice smoker analogy. It points out that the mortgage arena is not the only place where we subsidize stupidity (or bad judgment).
But, since you can comfortably afford the payment, I think it may be short-sighted to try to get a loan mod now, depending on the restrictions they might place. Why get a small chunk now, when you can get a larger concession in the future. It also will restrict your use of the property (e.g. you may not be able to rent it out if you want). I would wait another 12 months to see how far underwater you might ultimately be, then make a decision. Your best course might be to refinance or take a mod under Obama’s new program if it comes to fruition.
If I were you I wouldn’t walk now or take any loan mods until I can smell the bottom. Once you see how low things get you’ll get your best deal on a loan mod, refi, or whatever.
You should treat this exactly the same way as those who are renting with a comfortable monthly payment waiting for bottom before taking action and taking advantage of the market.
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