![]() ![]() Which brings us back to the question: Should I borrow from my 401(k) to get a house? Should I Borrow from My 401(k) to Get a House? 401(k) loans are paid back with interest.Īdditionally, some 401(k) plans prohibit you from making additional contributions until the loan is paid off.While there are a few exceptions, you must pay back 401(k) loans within 5 years.You can borrow up to what your 401(k) plan allows.However, for those that do, here are the rules according to the IRS: The first thing to know is, not all 401(k) plans allow for investors to borrow against their 401(k)s. Many people like the idea of being their own bank by borrowing and paying back their own retirement fund.īut, it is important to keep in mind that there is much more to 401(k) loans than acting as a personal bank. There is a reason some people say yes when asking, “Should I borrow from my 401(k) to get a house?” Taking a 401(k) loan may seem like a good idea, but if you don’t know what you’re getting yourself into, it could cost you a lot more than you bargained for.Ī 401(k) loan may impact the quality of your retirement, have negative tax consequences, and cost you more in the long run. So, I shouldn’t borrow from my 401(k) to get a house? Watch this video for a direct answer. That doesn’t mean it is the right decision for everyone. It’s easy to see why it is tempting to borrow from a 401(k) to get a house. Of the 29% who borrow from their 401(k), one-third of them did so to purchase or renovate a home.² In fact, the TIAA-CREF Borrowing Against Your Future Survey found that “nearly one-third (29 percent) of Americans who participate in a retirement plan say they have taken out a loan from the savings in their plan.”¹ It’s standard for banks to require as much as 20% down, and with home prices on the rise, that means down payments are also higher.Īs a result, investors are willing to borrow from their 401(k)s to cover the down payment. It’s understandable because it can be difficult for many first-time homebuyers to accumulate enough savings to make a down payment. “Should I borrow from my 401(k) to get a house?” is a question that comes up quite a bit, especially with first-time homebuyers. ![]()
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