Mortgage Loans

[thankfulheart]

Someone asked me if I knew and I didn't, so thought I'd bring it here...

If someone has a loan on his 401K and wants to do a hardship withdrawal for the purchase of a home, is there any benefit to paying the loan down/off first?  If he did, I would think that would increase the amount available to him, yes?  He's a young'un, so not much in the 401K as of yet.

Thanks!

[seemund]

You are correct.

The only advantage I see in repayment the current loan would be that a withdrawal won't have to be paid back and it will enable him to get more money @ withdrawal.

[marty56]

If you really want to help then IMHO I  would advise him not to buy the home if he has to do the 401k withdrawal to do so.

[thankfulheart]

Well, yeah, BTDT, but it's up to the horse to drink.  Just trying to learn myself while I teach others.

[DallasLoanGuy]

only withdraw the amount not out on loan..... then your penalty is only on that smaller amount.

if you pay it down/off with your cash.... then you would be withdrawing more.... and penalized on that higher amount.

[thankfulheart]

Is there a head-smacking smiley?  That makes perfect sense (and I don't know why I didn't figure that one out on my own, OY!)  Thanks!