pay off house with 401k?

[porkbutt 861]

~$100k left on a mortgage. 9 years left at 3%. ~400k in 401k. 46yo. considering covid relief on early withdrawals right now and considering buying second vacation home.  what say you?

[5-Points 2,726]

Why not? 

Penalties and payments come out equal or less? That's a no brainer.

Penalties and payments come out over current payments? Something to consider but your biggest financial investment will be paid off and you can cash out some equity to offset the 401K payments. 

[lod001 1,237]

7 minutes ago, porkbutt said:

~$100k left on a mortgage. 9 years left at 3%. ~400k in 401k. 46yo. considering covid relief on early withdrawals right now and considering buying second vacation home.  what say you?

Hell no. You'll make way more than 3% on that 100k in the market. 

[IGotWorms 3,310]

No way. Don’t touch your retirement, period, but definitely don’t do it for such a low interest debt. You should be getting around 7 or 8 percent on average in the 401k so it makes no sense to use that to pay off low interest debt at 3 percent.

[Cdub100 3,380]

Why? Most of your payment is the principle. Unless you have a super high rate you're better off leaving your money in the market and making a higher rate. I also think you have to pay that money back in 3 years or pay the tax on it.

[5-Points 2,726]

24 minutes ago, 5-Points said:

Why not? 

Penalties and payments come out equal or less? That's a no brainer.

Penalties and payments come out over current payments? Something to consider but your biggest financial investment will be paid off and you can cash out some equity to offset the 401K payments. 

Pump the breaks, I missed the buying the second home part. I'd say yes to paying off the current mortgage but I'd advise against taking on another mortgage (for a vacation home). 

You're robbing Peter to pay Paul and you're Peter. 

ETA: Whatever you cash out from your 401K is considered income, which you'll pay taxes on next year. 

[Rusty Syringes 478]

This is a terrible idea. You're paying 3 percent, giving up something that could earn exponentially more than that and then tossing your greatest tax deduction out the window. This is absolutely terrible idea.

[IGotWorms 3,310]

9 minutes ago, Rusty Syringes said:

This is a terrible idea. You're paying 3 percent, giving up something that could earn exponentially more than that and then tossing your greatest tax deduction out the window. This is absolutely terrible idea.

Need a tax guy on this but I’m not sure the mortgage interest deduction is meaningful. As I understand it puts few people above the standard deduction and even then it phases out pretty shortly after you start itemizing. So the band of people who still get real assistance from the deduction is pretty narrow as I understand, at least under current tax law. But again I might be wrong on that.

But regardless, agree with your ultimate advice of don’t do it.

[Utilit99 4,099]

Trump or BLM/Biden sign in the front yard. If a Trump sign, buy more home, car, and health insurance because you will be vandalized if not murdered by lefty democrats.

[BLS 313]

Hell no.

Make double payments on the house and you'll be done in 3 years.

[Old School 360]

Got to agree with the majority here.

401k is for retirement. And you’ll need it. 
9 years left on the house? Cool. Paid off at 54.? Great- add a little extra to the principle every month and Pay it off even sooner.

Retirement is no joke. They tax the frick out of everything, including social security. Keep adding to your retirement- don’t take it now to use for something other then retirement.

[TimmySmith 2,782]

Don't.  My brother in law is deep in the 8 figure career earning and he carries a mortgage on his house. I asked why. He said a mortgage is basically free money. The principal is a loan to yourself and the interest is written off.  Of course with the Trump standard tax deduction may have an effect on your writeoffs. Still 3% is dirt cheap.

At this point I don't know if I will ever pay my house off, and while I would prefer to, I am not sure It matters. I am halfway there.

[jonmx 1,580]

If you need money for a vacation home, i would use the equity in your current home.  Cheap money.  Let your retirement money grow with the market.  

[BufordT 371]

You can only tap into that money if you've been adversely affected by the covid.

[edjr 5,557]

I made a thread here back in what Fenruary or so about borrowing 50k from my 401k, which I am paying back in 2 years at 2k a month (from my salary) 

I used 25k of it to play in the stock market starting in April (up 9k since I started)  the other 25 is sitting there waiting to use to purchase the right investment property. (which probably wont be till 2021)

almost all of you told me not to do that loan. Who knew covid would hit and it would be so easy to make money on stocks from April till June. I wish I used all 50 k. Its much harder to do well now.

[Utilit99 4,099]

Better plan:

Write a book on how you want to instill socialism as a form of government here in the US. You should have 3 houses in no time.

[edjr 5,557]

Just now, Utilit99 said:

Better plan:

Write a book on how you want to instill socialism as a form of government here in the US. You should have 3 houses in no time.

My uncle L Ron did quite well by making up an entire religion.

[porkbutt 861]

what i figured. i just hate having any debt. thanks for the inputs

[Patriotsfatboy1 1,432]

2 hours ago, edjr said:

I made a thread here back in what Fenruary or so about borrowing 50k from my 401k, which I am paying back in 2 years at 2k a month (from my salary) 

I used 25k of it to play in the stock market starting in April (up 9k since I started)  the other 25 is sitting there waiting to use to purchase the right investment property. (which probably wont be till 2021)

almost all of you told me not to do that loan. Who knew covid would hit and it would be so easy to make money on stocks from April till June. I wish I used all 50 k. Its much harder to do well now.

How did your 401k do during that time?

[edjr 5,557]

1 minute ago, Patriotsfatboy1 said:

How did your 401k do during that time?

Unlikely it did that well. 

[jonmx 1,580]

22 minutes ago, edjr said:

Unlikely it did that well. 

I don't know, I have options for S&P 500 index funds and small cap funds which gained 19% and 28% between April, May and June.   And on those gains in my retirement fund it is all tax deferred gains.  You would have to pay whatever your top ordinary income tax rate on those which is probably about 22% at the federal level and another 5-7% at the state level.  

[FlyinHeadlock 459]

Been debt free for years, great feeling but really hurt my credit score. It's not awful but it has dropped about 50 pts. Not that I even need credit but just messed up that someone who paid all their bills, used credit responsible get penalized for no longer being "in the game". I knew this was going to happen though so I bumped up my credit card limit as high as I could. I figured they would not do anymore increases once it started dropping.

[edjr 5,557]

3 minutes ago, FlyinHeadlock said:

Been debt free for years, great feeling but really hurt my credit score. It's not awful but it has dropped about 50 pts. Not that I even need credit but just messed up that someone who paid all their bills, used credit responsible get penalized for no longer being "in the game". I knew this was going to happen though so I bumped up my credit card limit as high as I could. I figured they would not do anymore increases once it started dropping.

I only bought a new car because of 0% apr.  free money.

[Utilit99 4,099]

1 hour ago, FlyinHeadlock said:

Been debt free for years, great feeling but really hurt my credit score. It's not awful but it has dropped about 50 pts. Not that I even need credit but just messed up that someone who paid all their bills, used credit responsible get penalized for no longer being "in the game". I knew this was going to happen though so I bumped up my credit card limit as high as I could. I figured they would not do anymore increases once it started dropping.

My score went down from 815 to 790 because one credit card I never used closed automattically. I only have 1 personal CC and one AMEX for work which doesn't factor in. 

Having no debt is the greatest freedom you can enoy in life. It's worth every effort to achieve that in life as early as possible.

[FlyinHeadlock 459]

I put almost everything on the CC. Normally there is a charge for high dollar purchases but the cashback counters it most of the time. Some contractors don't charge me but they likely factor it in.  I've been doing a lot of home remodeling and put everything on the card. I probably put 100K on it the past year but pay the balance every month. The cashback is set up on automatic when it hits $20. I have all these $20 deposits lol. It's really the only way though to keep my credit score somewhat intact otherwise I'd never use it.  

[BLS 313]

16 minutes ago, Utilit99 said:

My score went down from 815 to 790 because one credit card I never used closed automattically. I only have 1 personal CC and one AMEX for work which doesn't factor in. 

Having no debt is the greatest freedom you can enoy in life. It's worth every effort to achieve that in life as early as possible.

We're down to no debt sans our mortgage.  I'm making double payments on it and it's currently a 15 year note.

I should have it paid off in four years.  Once we are debt free, we don't need credit.