$15k from my 401k for a down payment on a home smart?

Hello,

I’m looking into borrowing $15k for the down payment for my home from my 401k. I won’t be penalized but obviously have to pay it back within 5 years plus my 20% already invested. I plan in using all of that money I’ll sell it for in 15 to 18 years towards my retirement home in Las Cruces NM. Do you think this is a good idea? Thanks all help and advice is greatly appreciated!:pray::call_me_hand:

Hi Gabe! Short version, this is a bad idea. Taking out a loan against your 401k or pulling directly from it and then paying yourself back is a big risk. If something goes wrong, you have severely penalized your future self. I hope @Jeremy will provide some well-thought out input as to why or why not you should do this. Here are some resources to put that potential risk in losing time and money into perspective.

Question about “borrowing money from the bank to invest”
Why Borrowing Money From Your 401(k) or IRA Is a Bad Idea
3 Reasons a 401(k) Loan Is a Terrible Idea

Hey Gabe!

I don’t have much experience with 401k loans, but from my research they don’t seem like the worst place from where to borrow money. That said, ideally you wouldn’t be borrowing any money for a down payment. It could pinch you even more when you’re trying to pay the mortgage and the 401k loan. I worry it points to an unwise financial situation, but it’s hard without having a more complete picture.

  • How much do you make per year?
  • Do you have any other debt?
  • How much is in your 401k/other investment accounts?
  • How much is the home you want to buy?