[USER]

Trying to evaluate pros and cons of taking loan out of 401K to purchase a property.

I have a very good deal in hand.

I’m considering taking a loan from my 401(k) to help finance a property purchase, and I’m curious to hear different perspectives.

What are the pros and cons of using a 401(k) loan for buying real estate?

Is it generally considered a smart financial move, or are there better alternatives to explore? Specifically, I’d like to know about potential risks, tax implications, and how it might affect long-term retirement savings.

If you’ve had experience with this approach, did it work well for you, or did you encounter unexpected challenges?

Any advice or personal stories would be greatly appreciated!

[Stuart]

Don’t do it – unless you have no other way to borrow some NEEDED money.
Two downsides.

1. You will have to pay it back immediately- maybe in 30 days? – if you quit or lose that job.

2. You will be paying back the loan with already taxed money – right? And then when you take the money out after you retire, you will have to pay tax on it again. Not a good plan, eh?

[Brandon]

I have done it. You pay the interest to yourself with either a 5 or 10 year monthly pay back plan(I use Fidelity and other plans could differ).

The main con is you’re having to pay back the loan over that period. Granted, you can pay it off sooner if you have the means.

Major pro is that interest is going back to yourself.

[Darrell]

I would not recommend it. With some plans it is immediately called if you lose your job or change jobs.

But the big issue is it’s not growing for you.

That money is no longer working and if you think well yeah but I’m going to be paying myself back interest, remember it’s market rate interest and that is nowhere near what earnings in the market should be.

Taking money out of your 401k now This is exactly how you end up living on social security later.

[Chris]

I did it, and it was one of the best financial decisions I ever made. Think about the current interest rates though.

It might depend on whether you’re using this for money down vs avoiding mortgage.

[Sylvia]

I think there’s a max. $50k for 15 years first home otherwise 5 years?

[Author]

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