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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 128456|
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).
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