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House downpayment- Loan from Roth IRA or sell investment account funds

Home Mortgages and Home Buying House downpayment- Loan from Roth IRA or sell investment account funds

  • Avatar drrajkumar 
    Participant
    Status: Physician
    Posts: 3
    Joined: 09/06/2017

    We are planning to buy a new house next month. We aggressively paid mortgage on the current house we live in. As a result, lot of money is tied up in the house. We need to sell the current house and use the money for downpayment on the new house. Our realtor told us today that it will decrease our choices and will be difficult to do. Is it a good idea to take the original contribution from ROTH for downpayment and return it when my current house sells? I also have enough money saved in Vanguard investment account primarily in mutual funds. Is it better to sell the funds in the investment account to cover downpayment (I will be stuck with taxes on capital gains). Appreciate your advice. Thanks.

    #206120 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1750
    Joined: 02/01/2016

    You can do a 60-day rollover, but you can not take a loan from any IRA. 60 days is a very short time period for what you want to do.

    After 60 days it will be treated as a distribution. Contributions can be withdrawn at any time tax and penalty-free, but earnings are subject qualification status. Other than current year returned contributions, you can not re-contribute any amount withdrawn.

    Other options would be a 401k loan and/or a margin loan on the investments. However, the mortgage underwriters would likely have a problem with other loans to meet down payment requirements.

    #206123 Reply
    Dreamgiver Dreamgiver 
    Participant
    Status: Physician
    Posts: 753
    Joined: 03/09/2017

    This is done all the time, you buy a house with a contingency specifying that if your current home does not sell the deal is up. Yes, some sellers might not accept your offer but such is life. On the other hand, if the local market is hot, your house will sell and everyone is happy. If the market is not hot, your house will take longer to sell but it makes the seller of the house you are interested in more likely to accept your contingency due to a lack of buyers. I would not take a loan out of your retirement accounts unless you know for sure you can pay it back within the specified timeframe for it not to be considered a distribution.

    #206126 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3789
    Joined: 01/08/2016

    Nope.

    Yes.

    Or save more.

    #206127 Reply
    Liked by ENT Doc
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3159
    Joined: 01/14/2017

    Why the new house?

    #206129 Reply
    Avatar drrajkumar 
    Participant
    Status: Physician
    Posts: 3
    Joined: 09/06/2017

    Thank you

    #206132 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 949
    Joined: 02/11/2019
    Splash Refinancing Bonus

    Depending on how much you need can you do a heloc on your current home?

    “Never let your sense of morals prevent you from doing what is right.”

    #206133 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 743
    Joined: 01/26/2017

    Leave your retirement accounts and investments alone. As someone already said make the new house closing contingent on sale of old house.

    #206134 Reply

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