Can we use our 401k or take out a mortgage – 15 year fixed?

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We are building a new home and need to take out a loan – about $ 200K. My husband’s 401k can more than cover this. Upon applying for a 15 year fixed (@250K)- the interest was a whopping 147K. How much can we borrow from the 401K? We also have an ok separate retirement account that i was think about tapping into. We need to save for 2 middle schools students to go to college. It seems that 147K interest would be great for college – no? Please advise if you can – Its all a racket – thanks –
My credit score is 750. Thanks for all the answers – that was interest on a 15 yr. @ 6.65 (or close.) I see it 6.30 today. We have never had debt – so that 147K in interest is “killing” us. I know we can accelerate payments etc. But wow. Thanks

5 Comments
  1. Reply
    sortaclarksville
    May 21, 2011 at 3:35 am

    I believe you can only use a 401K to borrow against for a home if it is your first home.

  2. Reply
    manabell
    May 21, 2011 at 3:40 am

    Whatever you do, DO NOT tap into your retirement accounts! You will pay rediculous fees and penalties, so if you can’t swallow the interest, you definately won’t want to pay all the penalties.
    Every 401(l) is different in terms of the amount you can borrow, so read the packet of info about yours or find a phone # to call to find out.

  3. Reply
    googleisit
    May 21, 2011 at 4:29 am

    You can take a loan up to half your vested account value. I dont get that your interest was 147K??? Is your credit shot to hell?

  4. Reply
    redwine
    May 21, 2011 at 5:06 am

    not sure if you are looking at this correctly. The total interest payments may be $ 147K, but they are paid out over 15 years, plus the gov’t will let you deduct the interest payments, which will reduce it by 30%. Using the 401K is OK, but there are usually rules set by your company about how much you can withdraw and for what purposes. You will still need to repay your 401K with interest (essentially repaying yourself), but not get the deduction from the governme

  5. Reply
    006
    May 21, 2011 at 5:54 am

    Here’s the thing about taking a loan from your 401k. Not only will you be paying it back with after-tax dollars, the money will not be in the fund to grow like it should. Think long and hard before borrowing from a 401k. Each 401k is different, so you’ll have to find out from your 401k itself (HR should be able to help you with this) how much you can borrow.

    If you want to save for college, you should look into an option designed to help you save for college, like a 529 plan or something similar.

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