Borrowing from TSP for down payment?

[Anonymous]

Anyone done this? Pros and cons?

[Anonymous]

Assuming the same rules apply when you borrow from your 401K - the main rule is that if you leave your job before the loan is paid back you either have to pay it back within 60-90 days (depending on employer) or you take that money as income and pay taxes plus 10% penalty.

Also, most employers won't allow you to borrow more than 50% of your vested balance and you can't have more than one loan out at the same time.

The pros? As you pay back your loan - which will happen with each paycheck -you are paying yourself back plus interest.

[Anonymous]

My DH did this to buy his condo -- and no, the rules are not all the same as borrowing from a 401k. The main difference is that a TSP loan has a 2% interest rate that gets paid into the borrower's TSP when you pay it back. So that's a pro.

Cons - you might want to leave your job, you will miss out on growth and compound interest for the money you pull out, and needing to borrow a down payment in the first place might be a sign you can't afford the house.

[Anonymous]

pro - you pay yourself back including interest
con - you miss out on earnings for the amount you borrowed

[Anonymous]

We did it to buy our first home. 1% interest. We could easily redo it to pay it off earlier, which we did. I ended up leaving the feds when I owed $3K. I had 60 or 90 days to repay it back or the whole thing would be counted as a disbursement and taxed. We planned the whole move to private practice, so it was not a hassle for us to repay the $3K quickly upon leaving. Whole process was seamless and worked out well in our favor. We then sold the house two years later and made $30K over what our down payment was.

[Anonymous]

This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

[Anonymous]

We did it but we didn't borrow too much so I'm not worried about paying back or emergency issues. No downsides so far.

[Anonymous]

Anonymous wrote:This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

so many judgmental assumptions and you don’t even know people’s situation. I hope your spouse gambles your money away at the casino!

[Anonymous]

Anonymous wrote:This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

Highly unlikely with one paycheck family working for govt. But this is DCUM so anything goes.

[Anonymous]

Anonymous wrote:This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

[Anonymous]

Anonymous wrote:This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

As my dad would have said "Ah, go scratch your a$$"

[Anonymous]

Anonymous wrote:This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

Literally, how is this even possible?

[Anonymous]

Anonymous wrote:

Anonymous wrote:This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

Literally, how is this even possible?

PP forgot the line that they inherited money and didn’t actually experience any humility. You know, it’s just a different way of looking at the world. I hope their family puts them in a nursing home- one of the low grade chains and pissed their money away on strippers and horse races.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This sounds like a horrible, horrible idea. But, if you are looking to make sure you stay in debt and live above your means, then go for it.

It's just a different way of looking at the world. But, what do I know? No debt at all. $900K house paid off, no car debt, no college debt, and about $1.8 mil saved on a single-earner gov. salary household. But, hey, if you want to take from your TSP to buy a house that you can't afford, good luck with that.

Literally, how is this even possible?

PP forgot the line that they inherited money and didn’t actually experience any humility. You know, it’s just a different way of looking at the world. I hope their family puts them in a nursing home- one of the low grade chains and pissed their money away on strippers and horse races.

no. no inheritance at all. In fact, all of our parents are still alive. Only one of my grandparents finished HS (a grandmother). DH has a military pension. Other than that, we invested in some real estate (not commercial) that we made some $ on, but we also lost money on housing. We don't buy most things until we can pay for it (not including housing), we paid off student loans before we had kids. We don't spend a lot... but we still spend on pretty much all that we want/need. We invest $ and let the market help us out over time.... that's how you make $. All of the $1.8 mil is money that we worked for, saved, and invested over many years. We are in 40's/50's. Our house was largely the culmination of living in Townhouses and investing in another and over time moving up to a SFH. We actually lost money on our last two homes.... but did make some money in the 2000s.

The different way of looking at the world is not wanting to be shackled by debt and therefore, making choices that delay gratification until you can afford the next purchase.

[Anonymous]

Any reputable financial adviser would tell you this is a very bad idea. You need to pretend that money doesn’t exist and don’t touch it.