401k / IRA Mortgage Loan?
Is it possible to take out a mortgage loan via a traditional IRA or 401k? A client made mention of this this past week and I had never heard of it.
Is it possible to take out a mortgage loan via a traditional IRA or 401k? A client made mention of this this past week and I had never heard of it.
Permalink Submitted by Alan - IRA critic on Wed, 2025-05-28 17:01
There are no loans available from an IRA, but if the 401k includes a loan feature the participant could take out a 401k loan for the lesser of 50,000 or 50% of their vested balance. If the loan is for purchase of a principal residence, the plan may allow repayment for a longer period than the usual 5 years. Payments must be made back to the plan at least quarterly and include principal and interest. Interest paid back to the plan is NOT eligible for the mortgage interest deduction.
The risk is that if the participant leaves the company with an outstanding 401k loan, the plan will require repayment within 60 days, and if not done that will result in a 1099R taxable distribution from the plan.