Reply to Borrowing from retirement accounts for down payment

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[quote=Anonymous]We did option 2–as a 5 year loan. The money we borrowed does not earn interest, but does ultimately end up back in the account— an we did not lose employer match. . We paid off about 45 months, and are getting ready to make a lump sum repayment for the rest.

The upside is that moving again costs a lot of money—agent fees, origination fee, inspection fees, survey fee, moving company. It’s a lot cheaper (and less stressful)  to move once. Downside is you lose the interest on the withdrawal until you put it back.  And, if you switch jobs before you pay it back, you have to treat  the amount of the loan outstanding as a withdrawal,and pay interest and penalties.

I say do it if;

You are younger (not nearing retirement)

You are doing a loan, not a withdrawal

Your budget can easily handle the monthly repayment amount on the loan

You expect to be at your job until the end of the repayment period.

I’m in TSP, which has a very low interest rate on home loans. Also, the  value of my house grew faster than my TSP. Lifecycle fund. So, I  came out slightly ahead by borrowing and buying. The money I pit in my house grew fast. But no one can really predict a housing crash or a stock market crash.

Usually, I would say no go.  But I think buying a house is one of the few things you bend rules to do.

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