Many young homebuyers cash out their 401(k) retirement plans and use the money as a downpayment without considering the negative long-term consequences: They can be hit with income taxes, a 10 percent penalty triggered by early withdrawal and the loss of future tax-deferred earnings. Experts say that even borrowing from a 401(k) plan isn''t a good idea because the holders of the retirement account lose tax-deferred savings and risk selling investments before the stock market completely recovers. Instead, buyers with steady sources of income might want to consider obtaining piggyback loans, which combine first mortgages for 80 percent of the property price and second loans to cover the remainder, minus the downpayment. Those who decide to dip into their retirement accounts even after serious consideration, should do so only if they can still make their regular contributions as well as the loan payments.
You should check with your accountant for the tax consequences and call me to go over all your options. You may find that by going with a piggy back loan may save you money.
Russ Ravary is a licensed real estate agent in the State of Michigan and a Realtor.
Photos, Comp and Listing Information Courtesy of Realcomp II Ltd, Properties shown have been listed and sold by various MLS member REALTOR® agents.
I do not guarantee or warrantee any of the above information. Please feel free to verify any of the facts. I recommend to always have a home inspection, always consult an attorney about contracts, Purchase agreements and any legal questions. Also consult a CPA or accountant about tax consequence regarding a Michigan home sale, or Michigan foreclosure.