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we're thinking of buying the house we live in from my dad.......have lived in for 16 years with my dad.......colonial home with in-law apt.........there is less than 88k on the mtge left.......house and mtge in my dad's name..........we'll pay off balance.........we personally don't have a lot of debt........@ 5000k (car, credit card all together)........have a son going to a community college this fall (have 2 other children still in school) and we have a monthly cost of 1,200 of health insc premiums..........my husband gets layed off every winter (does paving - in this business for 10 years) and i just recently have been hired for a part time position..........is this a wise thing to do........we feel it could be since we have minimal debt and would then own the house out right (the home is valued at about 390k with taxes at 5600 per year)........any adivce......thanks
Applaud you for trying to get rid of debt, but don't think its wise to raid your 401k for this.
You can't "borrow" for your retirement, so having a large nest egg (ie 401k, pension, taxable account, ira's, etc) is crucial so you don't HAVE to work till your 90.
NOooooooooooooooo..! You don't ever touch 401k money. One thing you can do with it, however. You can borrow against your 401k. My daughter bought a condo about five years back, and borrowed the money from her 401k. That way, you pay yourself the interest, and will still have the 401k when it's over. You continue to pay into the account, but the majority goes to pay back the loan, until it's paid back. It took my kid about five years to pay it back, but her account is now paid off, and her 410k remains intact. You with draw the money and pay off the mortgage and it will cost you a fortune..! I big a big fortune..! Don't do it.
Check with your provider for details about borrowing against your money. It's the only way to go. The one drawback to borrowing against your 401k is, if you should leave your job for any reason, i.e. lay off or fired, you have to immediately come up with the balance you owe.
One more clever little trick the IRS may have in store for you is, if you buy a $390k home from a relative for only $88k, the IRS will consider it a gift and it will have huge tax ramifications. You better check with your tax man before you fall victim to a super huge tax bill arriving in the mail. You tax man can also show you all the ways you will get murdered if you withdrawn from your 401k to purchase the home.
No - dont do it! I have done a loan before for a small amount and paid myself back - that was fine. However, when I left the corp world, I rolled that 401k money into the bank fund. I kept withdrawing it because I was separated then divorced. I am STILL paying taxes on that money 7 years later - penalties and taxes were close to 30% of the balance and I chose to not pay them up front. You lose so much if you withdraw it.
we're thinking of buying the house we live in from my dad.......have lived in for 16 years with my dad.......colonial home with in-law apt.........there is less than 88k on the mtge left.......house and mtge in my dad's name..........we'll pay off balance.........we personally don't have a lot of debt........@ 5000k (car, credit card all together)........have a son going to a community college this fall (have 2 other children still in school) and we have a monthly cost of 1,200 of health insc premiums..........my husband gets layed off every winter (does paving - in this business for 10 years) and i just recently have been hired for a part time position..........is this a wise thing to do........we feel it could be since we have minimal debt and would then own the house out right (the home is valued at about 390k with taxes at 5600 per year)........any adivce......thanks
Unless you are 59 1/2, you DO NOT touch the 401K. I don't know what state you are in but get yourself on the title and a bank will refinance the property into your name. Then, when you get to that age, you can put more towards the mortgage. With a low LTV like that, you can probably qualify easier than most depending on your score.
Unless you are of retirement age, an early distribution may (usually will) cause you a 10% penalty for early distribution. I don't think you are paying a 10% mortgage interest, are you? In that case, it does not make sense to save the interest on the mortgage to be hit with a larger one in penalties.
You can borrow against some 401k's but not all. Don't take from it though if it's not a loan. Don't do it. I'd go to the library and borrow Suze Orman's book on finances. I know things may seem good finacially now but in a heartbeat they can change.
Is community college the most your paying for your child? Think about he bigger picture. What if he goes on to graduate school? Get's married. Grandchildren? Keep saving. The future is ahead, not here yet!
If you do it, do it before Obama will be the president because he wants to raise the capital gaines tax and that we lower your 401K., or better don't vote for Obama.
NOooooooooooooooo..! You don't ever touch 401k money. One thing you can do with it, however. You can borrow against your 401k. My daughter bought a condo about five years back, and borrowed the money from her 401k. That way, you pay yourself the interest, and will still have the 401k when it's over. You continue to pay into the account, but the majority goes to pay back the loan, until it's paid back. It took my kid about five years to pay it back, but her account is now paid off, and her 410k remains intact. You with draw the money and pay off the mortgage and it will cost you a fortune..! I big a big fortune..! Don't do it.
Check with your provider for details about borrowing against your money. It's the only way to go. The one drawback to borrowing against your 401k is, if you should leave your job for any reason, i.e. lay off or fired, you have to immediately come up with the balance you owe.
One more clever little trick the IRS may have in store for you is, if you buy a $390k home from a relative for only $88k, the IRS will consider it a gift and it will have huge tax ramifications. You better check with your tax man before you fall victim to a super huge tax bill arriving in the mail. You tax man can also show you all the ways you will get murdered if you withdrawn from your 401k to purchase the home.
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401K Question
, or better don't vote for Obama.
