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using 401k loan to pay off mortgage

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Icon Mini Profile awesloc





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Post Posted: Fri Jul 11, 2008 9:46 am    Post subject: using 401k loan to pay off mortgage
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I have a question. My wife and I are 46 years old. Plan on retiring about 20 years from now. If we each borrow $50 k from our 401k and pay off our $100k mortgage, what would we lose or gain? I have about $320K in 401 and she has about $180K. My interest is the interest we are paying the mortgage company now goes into our 401k, thereby offsetting the tax deductions for interest and actually gaining. Any pitfalls???????
Ulch

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Post Posted: Fri Jul 11, 2008 8:04 pm    Post subject:
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Yes there are lots of pitfalls. I know the Market is down which makes you think that it would be good investment. First off you will have to pay penaliies and taxes for accessing your 401k. I don't know the rate or terms of your loan so it is hard to advise you any further. Please post more details about your Loan and I will do my best to respond.
Icon Mini Profile Niicss
Niicss




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Post Posted: Sat Jul 12, 2008 2:15 am    Post subject:
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Welcome awesloc.

Using the 401k fund to pay off the mortgage loan is not a good idea. By using 401k loan to pay off mortgage, you are actually restricting the future growth of your retirement fund. Now loose your job then your loan from 401k fund will be due in full and you will be in trouble then.

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Icon Mini Profile evolovik26
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Post Posted: Sun Jul 13, 2008 8:28 pm    Post subject:
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Well a loan against 401k would work since you would be repaying yourself back into your 401k. Whether or not it is financially sound idea is another question. You would have to run the numbers to get this one worked out.
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Icon Mini Profile vegas_storms





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Post Posted: Sat Sep 13, 2008 3:39 am    Post subject:
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As long as you understand that if you lose your job it will cause some issues then go ahead and do it. Of course your personal tax deductions will have the final say as to whether it's a good financal decision. I.e. if your using the interest as a tax deduction it may bring down your actulally savings down to a point where it's not financially feesable to do it.
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