No. of Recommendations: 1
Brewologist: "2. My 401k offers the option to take a loan of up to $50k at 4.25% that our mortgage broker says can be used for part of the 20%. If we chose to do that, we could cover the whole downpayment out of the loan plus liquid savings. Downside is that the withdrawn funds aren't available to appreciate for a while and the loan is due if I lose my job."

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"?

In the interest of full disclosure, I'm not a fan of 401(k) loans. Yes, "that's retirement money" is surely part of it, but primarily because I've found life rarely proceeds in accordance with the script I've written.

That said, remember that the "earnings" you're paying yourself in the 401(k) loan repayment interest will be taxed twice. You're making the payments with after-tax dollars, and everything that comes out of the 401(k) will be taxed as ordinary income. (This assumes there are no after-tax contributions. Loan repayments, including interest, are not contributions.)

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