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Personal Finances / Buying or Selling a Home
|Subject: Re: Downpayment Sources||Date: 5/10/2013 8:45 PM|
|Author: Rayvt||Number: 125249 of 128456|
First, IIRC, when used to purchase a home, you can have 30 years to put it back in.
I only have direct knowledge of Motorola's 401K plan. AFAIK, it's pretty typical. For a home purchase, you have 10 years. Not 30.
When I left in 2006, you had 60 days after quitting (or getting laid off) to pay off your 401k loan(s). I just checked -- and now, WOO-HOO! you can keep the loan(s) as long as you continue to make the monthly payments by direct debit.
"Interest" is defined under the Finance Code as "compensation for the use, forbearance, or detention of money" .... please explain again how it does not apply in the context of a 401-k loan.
Sure. Easy. You don't pay interest to yourself. You don't pay compensation to yourself. It's a logical impossibility. The entity (you) that is receiving the "interest" is the same entity as is paying the "interest".
Just like you don't "pay" yourself for mowing your own lawn.
The "interest" you pay on a 401k loan is simply an additional deposit, paid with after-tax dollars. All withdrawals are subject to income tax, both the original pre-tax contributions *and* those after-tax contributions.
The Moto plan also charges you a $50 fee when you take out a loan. Your net costs are this fee plus the additional tax you pay on those after-tax deposits that are labelled "interest".
It's not interest, and it's not "paying yourself XX%", and it's not a "XX% bond". It's just an additional contribution that you will eventually have to pay extra income tax on. You can consider it as a cost of making the loan, along with the $50 loan fee.
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