401k loans allow for longer payback timelines when the funds are used to purchase a home. Instead of 60 months (5 years), it can be as long as 30 years.
When the cost to close is less than the maximum amount you can borrow, are you restricted to the loan deposit amount, the total cost to close amount, or the normal limit of half your funds up to $50,000 total?
Imaginary numbers...
If your 401k has $150,000 in it, you can usually borrow $50,000 from it using the normal rule of half the dollar amount or $50,000, whichever is less.
If you are buying a home, and the down payment is $20,000, and the total cost to close is $40,000, and you want to take a 401k home purchase loan with a maturation date beyond the normal 60 month limit, what is the total amount you can borrow?
- the normal limit, $50,000, still applies
- the total cost to close, $40,000
- the loan deposit only, $20,000
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