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Author: Otter9 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 267396  
Subject: 2nd Mortgage/retirement funds ? Date: 1/3/2013 6:13 PM
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First time poster here. I know it's a big no no but I wanted to take my Roth IRA funds and payoff a 2nd mortgage ($40,000) that I am paying 9% on. I can't refinance and include it due to current value of the home and the 80/20 restrictions.

With this done I would refinance my current home again lowering those payments to be paid back to the Roth

On top of that I finally (5 yrs) sold my old home so I have about $500 extra (I rented it) to pay back my Roth.

Thoughts?
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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260116 of 267396
Subject: Re: 2nd Mortgage/retirement funds ? Date: 1/3/2013 7:59 PM
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You have to have at least $40k in original contributions in order to be able to execute this plan. If you take out your earnings (value of the Roth over and above your contributions), you will be hit with a penalty. As for paying back to the Roth IRA, you have 60 days to return your original contributions. After that, you can only pay back $5000/yr ($6000 if over age 50). You would have to make an absolute commitment to yourself to rebuild your retirement savings.

What is the rate of your first mortgage you wish to refinance? Based on the difference between that and the new rate, will it take you more than 30 months to pay off the closing costs with the savings? If not, then you may want to shop for a better refi deal. If you haven't checked out a credit union, definitely do so before making any decisions.

Would I do this? Probably not. The lost retirement savings is significant, so this would be last choice for me. Is it that you cannot afford the mortgages or are you just trying to ease the payments? Do you have other retirement savings? How long do you have to rebuild your retirement savings? These questions may have an impact on your decision as well.

Fuskie
Who thinks if you can make everything work as you described, it is possible to be successful with your plan, but there is a lot of risk to it as well...

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Author: Otter9 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 260125 of 267396
Subject: Re: 2nd Mortgage/retirement funds ? Date: 1/3/2013 11:20 PM
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My current loan is 5.375% so lowering the interest rate should save me a few hundred dollar. Paying off the 2nd will save us $550 a month and I will have $500 a month after selling my second home. That gives us about $1,200 extra a month to pay toward the 60 day goal.

What I could do is play the credit card game of which I have higher limits on to pay the balance of Roth. Those rates are geneally small to zereo abd those saved payment would then be applied to the credit cards until the are paid off which would be less than 36 months,

It sounds alright but that's what I said when I feel out of that oak tree too and broke my leg...

Any more thoughts on that?

Thanks Fuskie for helping me understand

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