Worried about down payment on your first home? You may be able to tap into your 401(k) for your down payment. NOW is the perfect time to buy a house so it might be worth to touch your retirement money earlier than planned.
You can generally borrow up to half of your balance, up to a maximum of $50,000, from the account at any age and for any reason without tax or penalty. The interest you pay on the loan, generally the prime rate plus one or two percentage points, goes back into your account.
Loans taken from 401(k)s must be paid within 5 years, but your employer may give you up to 15 years to repay a 401(k) loan if you are using the money to buy a home.
There is one down side to borrowing from your 401(k). If you lose or leave your job, you generally have just 60 or 90 days to pay back the loan or it will be subjected to taxes, plus a 10% early withdrawal penalty if you're under 55 when you leave
In principle, it's not a good idea to tap into your retirement funds, since you'll need those funds when you get old. But, borrowing from 401(k) can be the quickest, simplest, lowest-cost way to get the funds you need. Requesting for a 401(k) doesn't require credit checks and it doesn't affect your credit rating. Getting your 401(k) loan can be just few clicks away and you can have your check on hand within a few days.
In addition to that, it's easy to repay your loan. You can pay your loan earlier than scheduled without prepayment penalty. You can also pay it back through payroll deductions.
Just like any type of loan, you should always have a clear plan of paying on time or earlier. If you have any questions on your 401(k) loan, don't hesitate to call me.
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