• Kori Kurtz

Fund Your Down Payment with a 401k Loan

One of the biggest hurdles preventing first time home-buyers from acquiring their first home is coming up with the down payment.

Luckily, for those who have been diligently putting away those beautiful pre-tax dollars into their qualified 401(k) over the years have an HUGE advantage. It's possible to borrow up to 50% of your 401(k) balance to apply towards a down payment on a house.

The best part is that you are paying back the loan to yourself, not to a bank. While using this strategy to beef up your down payment could increase your monthly payment, your total cost of funds will be less in the long than other financing options. Combine this with the added tax savings (if you are currently renting) and the benefits are further amplified.

However, there's no such thing as money with no strings, even if it's your money. If structured as an installment loan, the payments must be made on time out of your checking account or else you could receive tax penalties and other fines. Also, the loan might become payable if you change employers. Make sure you consult with a financial adviser before utilizing this strategy.


#401K #DownPayment #FirstTimeHomebuyers

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