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Exactly, no use getting yourself involved in what is essentially another adult's loan situation. No way you will be getting the good end of this deal. Let the estate situation play out while living in another house. Then if the house hits the market for a good deal and you still want it go ahead and make an aggressive offer and use the 401k loan at that time, but understand the risks of taking that loan.
That is the pitch of the RM sales people, "your kids won't be stuck paying the overage on the loan if the house is upside down".
On the otherside, if the loan is $100k and the value is $300k sell and payoff the loan.
Location: Stuck on the East Coast, hoping to head West
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There is still a 10% penalty on early withdrawals from a 401K to buy a house. It's a withdrawal from an IRA that allows you to avoid the 10% penalty. It's in IRS pub 590.
Don't do it. The money you have in your 401K should be used when you are no longer able to work. Using it to buy a house is such a bad idea. If you want to buy a house, start by cutting back on your monthly spending and save for the down payment.
You may be able to borrow money from your 401K, and then the interest on the loan you are paying to yourself. Downside is if you lose your job the full ammount is either due at once, or you will be taxed on a lump sum withdrawal. In my case it would be taxed at the 28% rate, for others it could be as much as 35% which may well go up next year. Do some thinking about it.
Taking out a loan is a much better option than cashing out your 401K. You will be taxed up the wazoo..it's not worth it trust me I learned the hard way.
Find out the requirements from your company about payback of a loan if terminated. My company allows you to continue to make the installment payments until it is done so even if you are terminated you do NOT have to pay the 401K loan back in full.
Considering cashing out 401k to purchase home.......Will not have to pay a 10% charge but was informed will have to pay a percentage on money because it will be considered income........Can anyone clarify this for me.......We are contacting our accountant but was wondering if anyone out there had any advice......
How much equity is there in that house? If there isn't enough to just get a normal mortgage and buy it out, then there probably isn't enough equity for it to be worth keeping. In that case just let the bank take it.
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