I'm 32 years old , closing cost is 24k , I need additional 9k plus furniture money. I currently have 50k in 401k account, 50k in my company stock account and 15k savings . I am able to borrow 21k from my 401k . Should I borrow all 21k and put towards closing and use 3k of savings and save remaining liquid for furniture and other just in case items ? Should I only borrow 9k from 401k and use savings ? Should I not touch my 401k and sell my company stock and get charged capital gains taxes?
Congratulations on your decision to purchase a home. I would recommend selling the company stock and paying the capital gains tax. Hopefully the stock has been owned for over one year to receive the lower rate. I would discourage borrowing from your 401k plan because if you were to leave the job, the loan becomes due before you leave. In addition, almost half of your investments is tied to your company which is too high. I hope you have much happiness in your new home.
I'd also suggest selling some of the company stock and affirm Dan and Jason's comments to not borrow from your 401(k). Assuming you are currently contributing into your 401(k), I highly advise to continue doing so if any way possible. Good luck in your new home!
Borrowing money for a down payment to borrow money is almost never a good idea, even if it is your own funds. Not only do you have the borrowing costs on the mortgage but the 401k repayment too. That could make for a cash flow crunch, not to mention the hit to your retirement savings.
I would wait to buy a home until you have the whole down payment saved. Or, sell some company stock and pay the capital gains tax. I would sell enough so that you don't entirely deplete your savings.
You are doing well to have $50K in your 401k at age 32 plus savings, plus a $50K stock account. Keep it up.
I'd definitely sell the company stock. Make sure that you choose the company stock which you've held longest to take advantage of long-term capital gains taxes. Never, ever, ever borrow from your 401k unless it means that you're using it to eat food. Not only do you run the risk of having the loan called as Dan mentioned, but now you're paying back the loan with after-tax money, meaning that you're going to be taxed twice on the repayment money. When you're selling the company stock, make sure that you're selling 1.2 times the amount you need. In this case, you're saying that you need $9k, so you'd want to sell $10.8k and put that $1,800 somewhere that you won't touch it so that you have the money ready when you file your 2013 taxes.
Also, don't go wild in buying furniture. You should cash flow that purchase. Don't borrow money to buy furniture. Don't sell stock to buy furniture. You'd be selling assets and purchasing (effectively) liabilities. Go to estate sales and haggle like crazy.
Once you're done with the closing of the house and settled in your house, look at diversifying out of your company stock. Think about it. You're getting a paycheck from this company AND relying on it for growth of your assets. What happens if the unthinkable happens (which happens a lot nowadays) and your company has financial trouble? You're faced with both losing your income AND losing the value of your stock, a double whammy. It's a risky position to be in.