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Personal Finances / Buying or Selling a Home

URL:  http://boards.fool.com/you-will-be-paying-yourself-interest-on-the-401k-30677901.aspx

Subject:  Re: Downpayment Sources Date:  5/10/2013  3:29 PM
Author:  Rayvt Number:  125240 of 128075

You will be paying yourself interest on the 401k loan, so I would suggest that the funds are appreciating at a rate equal to the interest rate. Or perhaps you meant "aren't available [for me to invest in the market] to appreciate [or depreciate] for a while"?

And there is a further potential opportunity cost if the amount you could have earned in the market is greater than the interest you are paying yourself (instead of to a different lender).


You have to look past the form to the substance.

A 401k "loan" is not a loan, nor is the "interest" really interest. Nor, actually is the "payment" really a payment.

What is truly going on is that you are taking a withdrawal from your 401K, and then putting that money back in over a period not to excess 5 or 10 years. Plus putting in a small additiona