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re: Borrowing for Second Home/Vacation Property Downpayment?
Posted on 8/22/22 at 6:26 am to deeprig9
Posted on 8/22/22 at 6:26 am to deeprig9
quote:
I thought you were a data center and cabling expert?
I did mortgages for about 15 years out of college.
deeprig is good people by me. We have communicated quite a bit over the years.
This post was edited on 8/22/22 at 6:28 am
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Posted on 8/22/22 at 6:39 am to deeprig9
quote:
There's an older one rolled over into USAA that went to Schwab. Then a newer one still at Fidelity. Then my current one at Voya (puke).
Id definitely roll my Schwab into my Fidelity (preference for me, others may flip the 2), just for the sake of minimizing the number of companies I’ll have to work with in the future. Nothing you can do about your Voya now, but roll that over as soon as you leave your current company.
Also since you don’t like your voya, just hit the minimums to maximize company match and start putting adding to the IRA from the rollover and as well as creating a brokerage/savings account.
No reason you can’t get that future retirement home, May just take a little longer than you were hoping before fully leveraging yourself
Posted on 8/22/22 at 6:45 am to deeprig9
Sounds like a financial stretch but without knowing income, expenses, age etc it's impossible to tell for sure.
Do you have any investments besides 401k or IRAs. If you have ample non-retirement investments you could borrow against those at favorable interest rates without having to sell the assets and realize capital gains.
$300k in 401k isnt a ton set aside for future retirement unless you're fairly young and/or expecting a pension, $500k is a lot of debt to cover if your net worth excluding equity in primary home is less than that.
Do you have any investments besides 401k or IRAs. If you have ample non-retirement investments you could borrow against those at favorable interest rates without having to sell the assets and realize capital gains.
$300k in 401k isnt a ton set aside for future retirement unless you're fairly young and/or expecting a pension, $500k is a lot of debt to cover if your net worth excluding equity in primary home is less than that.
This post was edited on 8/22/22 at 7:32 am
Posted on 8/22/22 at 7:25 am to deeprig9
quote:
Any advice from Money Board?
quote:
I am not looking for a life coach in this thread, but I appreciate your advice.
I don’t think you want the money board’s advice. Seems incredibly risky
Posted on 8/22/22 at 7:46 am to Weekend Warrior79
You can only borrow against current employer's 401k. Unless you roll the others into your current 401k you may not have enough to make 401k loan a viable option. Since you dont like the VOYA 401k, that's probably not something you'd want to do.
Before even considering 401k loan make sure you have a solid means to pay it back before next annual tax deadline just in case you leave employer for any reason. (Somehow, I just learned it's no longer just 60 days. Change passed in 2017 apparently.)
Before even considering 401k loan make sure you have a solid means to pay it back before next annual tax deadline just in case you leave employer for any reason. (Somehow, I just learned it's no longer just 60 days. Change passed in 2017 apparently.)
This post was edited on 8/22/22 at 8:12 am
Posted on 8/22/22 at 7:48 am to TorchtheFlyingTiger
Aren’t 401k’s maxed at a $50k loan amount too? I know mine is. Not sure if that’s plan by plan or law per se.
Posted on 8/22/22 at 8:08 am to Im4datigers
Good point about loan max.
IRS.gov
"The maximum amount a participant may borrow from his or her plan is 50% of his or her vested account balance or $50,000, whichever is less. An exception to this limit is if 50% of the vested account balance is less than $10,000: in such case, the participant may borrow up to $10,000. Plans are not required to include this exception."
IRS.gov
"The maximum amount a participant may borrow from his or her plan is 50% of his or her vested account balance or $50,000, whichever is less. An exception to this limit is if 50% of the vested account balance is less than $10,000: in such case, the participant may borrow up to $10,000. Plans are not required to include this exception."
This post was edited on 8/22/22 at 8:11 am
Posted on 8/22/22 at 8:25 am to Im4datigers
Another significant disadvantage of 401k loan in this scenario is stock market is also likely to be down at the time of the major housing correction OP is hoping for. So you'd be selling out off 401k positions while they're low to fund the loan then buying back after the correction as prices likely climb. You'll be paying a market premium to restore your 401k balance getting fewer shares in the process.
Then you must consider can you afford to pay back 401k loan with interest over 5 years and cover the additional mortgage if the property isnt truly cash flowing. (Not your revised definition of the concept)
Problems are further compounded in the likely case you have to cut back on retirement contributions to make the numbers work. Not to mention if further along this hypothetical market correction you have potential to lose income.
Then you must consider can you afford to pay back 401k loan with interest over 5 years and cover the additional mortgage if the property isnt truly cash flowing. (Not your revised definition of the concept)
Problems are further compounded in the likely case you have to cut back on retirement contributions to make the numbers work. Not to mention if further along this hypothetical market correction you have potential to lose income.
Posted on 8/22/22 at 8:56 am to deeprig9
quote:
I was just listing it as one of many non-attractive options. There's no need to be a snarky a-hole.
you CAN do it but check on cash advance fees AND make damn sure you do a balance transfer to a 0% rate card for 12 to 18 months AFTER the cash advance. if you cannot get card amount paid off by then, then use a HELOC to pay off cards. Moving money is an art. You can do that like i said IF you want 0% interest for awhile instead of the low HELOC rate from get go. I would use business credit cards if i was you IF you go that route not tied to your personal credit.
Even if you do not have a business there are different people out there who can set you up and get you 6 figures of business credit. Check out business credit builders and fund and grow.
LINK
LINK
i know the owner.
LINK
ETA: there are other ways to strip business credit cards also besides just cash advances. it is very easy for me just based on my business dealings.
This post was edited on 8/22/22 at 10:00 am
Posted on 8/22/22 at 8:58 am to Im4datigers
(no message)
This post was edited on 8/22/22 at 9:00 am
Posted on 8/22/22 at 9:08 am to deeprig9
1st and 2nd loans will come back in vogue.
Posted on 8/22/22 at 9:14 am to TorchtheFlyingTiger
(no message)
This post was edited on 8/22/22 at 5:18 pm
Posted on 8/22/22 at 9:21 am to deeprig9
It would be insanity to borrow on your credit cards or against your 401K for anything short of a family health emergency.
Careful with a lot of debt on resort properties---they get hammered in recessions. I stayed in a bay front house on Cape San Blas in 07 and it was for sale for $800K at the time. It sold two years latter for $300K as the owner was over his head in debt and his rental income went to crap. Now I suspect the house might sell for $800k so for 15 years it has done nothing in terms of value.
Careful with a lot of debt on resort properties---they get hammered in recessions. I stayed in a bay front house on Cape San Blas in 07 and it was for sale for $800K at the time. It sold two years latter for $300K as the owner was over his head in debt and his rental income went to crap. Now I suspect the house might sell for $800k so for 15 years it has done nothing in terms of value.
Posted on 8/22/22 at 9:56 am to freshfromthefarm
quote:
It would be insanity to borrow on your credit cards or against your 401K for anything short of a family health emergency.
nah. people do it all the time now. you need to learn how to play the game. solo401k loans are used all the time to increase contributions. Think outside the box. you just need a plan and disciplined money management. I covered the CC's above also.
Posted on 8/22/22 at 12:05 pm to deeprig9
you dont need 20% down, PMI with good credit is very cheap these days. 10% is the min down payment on second homes. Also HELOC rates are sky high right now so you would be borrowing that equity at a min of 7% right now.
Posted on 8/22/22 at 12:21 pm to deeprig9
Cash advance is an extremely poor idea. Tbh OP it sounds like you don’t have the money for this. If you have money in non tax advantaged accounts, just pull it out now. You’re hoping for a significant downturn so your money would better serve you outside of long term investments in this scenario
Posted on 8/22/22 at 1:02 pm to Fat Bastard
OP didnt mention having a solo 401k. Even if that's what they have, doubtful they're even close to the $61k max Solo 401k contribution (considering only $300k in combined 401ks). Your strategy s interesting but not relevant and only serves to muddy the waters.
Posted on 8/22/22 at 1:04 pm to deeprig9
quote:
assuming this would be a vacation rental for most of the year to hopefully cover costs until a retirement scenario where we just move in...
It is possible that the rental you buy may not meet your retirement needs.
I did the math on a beach property, but it did not seem to work for me even though I would pay cash.
You can only spend a couple of weeks on vacation there or it becomes second residence rather than rental property.
Buy a beach house only if you can afford it, and you don’t have to rent to make the note.
Emptying a retirement account seems a bit risky. You will have to retire one day, you do not have to have this house.
If you want it, more power to you, but I’d consider carefully whether this is the best thing for your money at this point in your life.
Posted on 8/22/22 at 1:43 pm to deeprig9
quote:
I am not looking for a life coach in this thread, but I appreciate your advice.
How is your plan going to work out if the economy really crashes and no one is around to rent your WAY over leveraged property?
Apparently what you're trying to avoid in this thread is a reality check.
And people wonder why real estate bubbles happen...
Posted on 8/22/22 at 2:45 pm to GEAUXT
quote:
Apparently what you're trying to avoid in this thread is a reality check.
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