Past Due: Radio 149 – Borrowing From A 401(k) To Refinance A Mortgage
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Today we took a Mailbag question from Brian and Jill. They’re paying a hefty monthly payment on their second mortgage and have been exploring the option of refinancing. The bank is willing to processing the refinance of the second mortgage – likely dropping their interest rate by almost 3% – but only if they can pay down the current loan’s balance to meet their loan-to-value (LTV) requirements.
Brian and Jill are looking at their 401(k) as a source of quick cash to help drop the balance on the second mortgage, complete the refinance, and greatly reduce the second mortgage payment. They wanted to know the pros and cons of doing this, what risks to expect, and if there was anything they weren’t aware of about 401(k) loans.
What looks like a pretty easy, simple solution can get quite tricky and messy when all the details of a decision like this are brought to the surface. I provided an interesting assessment of where they’d be financially if they just left everything as is, and compared that to where they might be 15 years from now if they borrowed on the 401(k) today.
If you have a specific question, I’d be happy to answer it and further cultivate the wisdom the of Past Due Radio masses. The experiences of our listener base provide plenty of insight we all can learn from; don’t hesitate to ask – I’m happy to help!