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Personal Finances / Buying or Selling a Home


Subject:  Re: Downpayment Sources Date:  5/10/2013  7:11 PM
Author:  JAFO31 Number:  125245 of 128887

Rayvt: "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 additional amount of after-tax money. It's like an IRA rollover except that instead of having 60 days to put it back in, you are allowed to do it monthly over 5-10 years."

First, IIRC, when used to purchase a home, you can have 30 years to put it back in.

Second, you must have a very peculiar definition of interest.

"Interest" is defined under the Finance Code as "compensation for the use, forbearance, or detention of money." See Tex. Fin. Code ' 301.002(a)(4).

Seems to me that the "small additional amount of after-tax money" you put is is what you pay for the privilege os using the 401-k funds, IOW, it is interest.

"That's if you jump through all the hoops, and don't leave your job before you've put it all back."

Are you certain of the truth of that statement? I am not. And it certainly was not true when I took a 401-k loan for home purchase.

"The "interest" is not really interest. It's just you moving your own money from your checking account to your 401K account. There is no "growth" involved -- you don't make a profit when you move money from your left pocket to your right pocket."

See the definition of interest that I referenced above and then please explain again how it does not apply in the context of a 401-k loan.

Moving money from your left pocket to your right pocket involves more "growth" than moving money from your left pocket to my pocket (either right or left).

Regards, JAFO
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