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I'm wanting to buy a house if I have already borrowed against my 401k can I borrow again for purchasing a home?

Sep 30, 2014 by Timothy from Anderson, SC in  |  Flag
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Hi Timothy

If your plan allows more then one loan at a time then the answer is 'yes'. If so you may be allowed to amortize the loan over 30 years (again, up to your plan). Remember that if you terminate employment your loan must be repaid within. 90 days.

Also consider that the 401k loan is not actually a loan. You are simply moving money from your own retirement account to yourself. Then you pay your account back over time. I'm not a fan of 401k 'loans'. I suggest you leave you retirement account alone and let it grow for your retirement. Take a mortgage for the house.

Hope this helps.

Comment   |  Flag   |  Sep 30, 2014 from Woodbridge, VA

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Ahh! Stop borrowing from your 401k assets! Imagine your future self at age 65 shaking his fist at you saying, "Don't use my retirement money to buy a house, I don't want to live off social security."

Using your 401k to fund anything besides retirement is not a good idea. But I can't stop you so the answer to your question is simple. check with your HR department. There is no way for any advisor to know without looking at your plan documents which we don't have access to.

Comment   |  Flag   |  Sep 30, 2014 from Minneapolis, MN

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Tim,

Each plan document specifies whether multiple loans are allowed. The existing loan hints that you've dipped into the 401(k) before (presumably not for a house), so you are already paying off that loan. A few points to consider before taking another loan:

-The money you withdraw won't be invested, so you'll miss any growth on the outstanding loan amount;

-Your loan principal and interest are paid back wtih after-tax dollars, and the money you withdraw form your 401(k) later is taxable, so the interest you're paying yourself will be taxed twice - when it comes in and when it goes out;

-Since cash is tight, you'll probably reduce your 401(k) contribution while repaying the loan, so you'll miss any growth on the contributions you would have made.

There is a time and place for using loans from a 401(k). Just be sure you consider the consequences before taking a second dip.

All the best,

Jeremy M. Shafer, CFP®

Comment   |  Flag   |  Oct 01, 2014 from Midland, MI

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