If your 401(k) plan allows loans, then you'd be permitted to borrow up to 50% of your vested account balance to a maximum of $50,000. Check with HR or review the Summary Plan Description to see if loans are permitted. While most 401(k) loans must be paid back over 5 years (with interest), you get up to 10 years for loans used to buy a home. Typically, the loan is paid back via payroll deductions. Any loan payments that don't get made will be treated as a taxable distribution and must be reported when you file your income taxes. And if there are taxable distributions before you reach age 59.5, those would also be subject to a 10% federal penalty tax. Though you can take a 401(k)
loan, that doesn’t mean you should. Be
sure to run cash-flow calculations to see if you can handle both 401(k) loan
repayments as well as mortgage payments (because $50,000 max won’t buy you much
home). Also check the impact on your future retirement well-being. Hope that helps.
Check with your plan administrator if your 401k plan has a loan provision. If this is the case then you can borrow up to $50,000 or 50% of the balance.
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