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Old 12-23-2012, 03:04 AM
gburciaga gburciaga is offline
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Join Date: Dec 2012
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Default Using 401k for long term benefits on 30 mortgage

Home purchase price is 366k (foreclosed home -County assessment of home is 536k)

In bank we have 52k

Considering taking money out of 401k to help with down payment - 34k. Using my 401k would (a) help us have a lower house payment (b) avoid mortgage insurance.

If we use 42k of savings +34k of 401k would = 76k down payment and we'd keep 10k in savings.

Mortgage insurance savings would be roughly $120 per month.

My 401k would require repayment within 60 months at 540 per month. I currently contribute 440 (pre tax) per month and would stop contributing and instead pay back the 401k loan. If I stopped contributing I would be taxed on the 440 so would net more like 310 so i'd need to anti up an additional 230 dollars per month to make the 401k payment of 540.

In five years I payback the 401k and begin to contribute once more.

With 401k money mortgage payment = 1659+230 (230 for five years then after those five years payment goes to 1659 and there's no mortgage insurance)

With out 401k, payment = 1811 + 120 mortgage insurance

This all sounds a little convoluted but I think there may be some benefit in using my 401k money. It would seem that it makes sense to tap into the 401k temporarily in order to benefit longer term on this loan. Not to mention there would be good equity in the home.

Looking to do a 30 year fixed.

I need some guidance. What am I missing here?
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