Others with more knowledge can clarify, but I think the biggest issue with 401k is if you leave your company (willingly or otherwise), it comes due in 6 months or is considered a withdrawal. Depending on your job and how easily you could pay it back if you had to, that might not matter.

I am thinking about taking a loan against my primary home to pay for the down payment of a second home in florida which I would rent out until I move in.

is that crazy?

I would rather not have to sell my equity positions, crypto, and 401K loans just because I think that may be more dangerous.

but would taking a loan against my 401K actually save me money over a second mortgate refinance?!

Two very different scenarios here. First 401s have limits on what is an allowed for the purpose of the loan. Doctor probably has a legitimate purpose. Cain it's much more doubtful but at least frame as a second home.

Secondly there are limits to the amount you can withdraw. That may or may not be enough.

Bottom line each of you need to talk to your 401 administrators on exactly what your account can do. Companies have a lot influence on the funds options. They could of designed them differently

Yeah, that's the other fun thing. I'm leaving my company to go to another company at the end of the month.

So could I still take out a loan with my 401k from the old company after I leave? I know my limits are $50k (at least looking online for documents; a signature loan essentially), but doesn't mention if I leave the company what happens.

More interested in the mechanics of the loan. Am I selling securities or just taking a loan against the value of my 401k? The total value is over 4x what I would be taking out.

~egon

Dr. Doctor said:

---

More interested in the mechanics of the loan. Am I selling securities or just taking a loan against the value of my 401k? The total value is over 4x what I would be taking out.

~egon

---

The money is "out" of the market. Essentially, the loan is the investment for the funds that you pull via the loan. As you pay it off, the principal and interest of your loan gets reinvested as per your investment allocation.

If you have good credit, check out Lightstream for a loan. I used them to do a short finance of a pool a few years ago. It was very easy, all the paperwork was online.

Luke is mostly correct. Most HELOC banks will track closing costs and forgive them if you keep it open for X amount of months. But each are different so shop it with lenders

DargelSkout said:

---

If you have good credit, check out Lightstream for a loan. I used them to do a short finance of a pool a few years ago. It was very easy, all the paperwork was online.

---

We used light stream for repairs a few years ago after a water related problem that insurance didn't cover. Agree the process was super easy and fast. Definitely worth checking out if you go that route.

Even w/rates inching up, money is still cheap. You will also find( or your bride will) other home improvements to be done if you did a refi/cashout. Depending on how long you've been in your house, you have likely built some equity up that can be taken out.

FYI, check water heater age & roof age. If you're going to stay or if you're going to sell soon, those things are high on the list that aid a sale if they are new, or newer.

Good luck!

Unless an appraisal is required or you're borrowing >$250K a HELOC has no closing costs.

If OP is a doctor, you might check with some banks to see if you have access to an unsecured line of credit. Extraco offers MD's a line of credit up to two months salary.

I'm always surprised at the amount of folks that don't have HELOCs or SBLs in place for emergencies or opportunities. If I had a dollar for every time having one in place before it was needed would have solved a problem, I'd be a very rich man. They're generally free to set up, have no ongoing fees, flexible draw & repayment, & competitive interest rates when the money is out.

mosdefn14 said:

---

I'm always surprised at the amount of folks that don't have HELOCs or SBLs in place for emergencies or opportunities. If I had a dollar for every time having one in place before it was needed would have solved a problem, I'd be a very rich man. They're generally free to set up, have no ongoing fees, flexible draw & repayment, & competitive interest rates when the money is out.

---

How long does it take to set up a HELOC? 3 days? 30 days?
I'm just trying to think of an emergency where I'd need to get my hands on cash so quick that the service will be delayed/denied if I don't pay in full immediately. Even if I wanted to get money out today of stocks, it'll still take 2 days to settle. Anything faster than that requires access to a real cash reserve like a topped up checking account or a credit card.

Medical emergency? No they'll bill you later
Urgent medical procedure that insurance has blocked pending appeal? Okay, been there, but used a credit card
House plumbing issue not covered by insurance? Credit card and could back pay with a HELOC.

I've always thought HELOC was for more slow moving, larger cash burn projects like home improvements.

HELOC takes 30-60 days right now to set up. Then, stick the checkbook in the safe and forget about it.

SBL takes 3-5 days to set up. Then, stick the checkbook in the safe and forget about it.

How I use them...If a need arises, put the expense on one and then decide a paydown strategy. Strategy can be monthly paydown, lump sum pay down from liquidating stocks, pay with a bonus/tax refund. The beauty is you decide. It lets you run cash leaner, and put your savings into portfolio instead of non productive cash.

Down payment on next house. Purchase of investment or recreational property. Business opportunity. Bathroom remodel. Tuition payments. Heck, right now my SBL is cheaper than mortgage or car loans rates.

I recently closed on a HELOC and it was probably 60+ days...

Agreed. Generally no closing costs on a HELOC, you pay no interest until and if you make a draw and the money is available almost instantly when and if you need it. Great tool.

< 30 days setup to close on HELOC with Credit Union of Texas.
no closing costs.

mosdefn14 said:

---

HELOC takes 30-60 days right now to set up. Then, stick the checkbook in the safe and forget about it.

SBL takes 3-5 days to set up. Then, stick the checkbook in the safe and forget about it.

How I use them...If a need arises, put the expense on one and then decide a paydown strategy. Strategy can be monthly paydown, lump sum pay down from liquidating stocks, pay with a bonus/tax refund. The beauty is you decide. It lets you run cash leaner, and put your savings into portfolio instead of non productive cash.

Down payment on next house. Purchase of investment or recreational property. Business opportunity. Bathroom remodel. Tuition payments. Heck, right now my SBL is cheaper than mortgage or car loans rates.

---

Fascinating. I had no idea this was a thing and I'm pretty savvy. Yes, I've heard the term HELOC but just assumed it was something not relevant to me.

Will check this out.

This is a timely thread since we are looking to do a large amount of remodeling as well. What's a good way to find/compare HELOC rates? Or does anyone have recommendations for ones with great rates?

Bumping for my current situation. Curious what the current helix environment is. Looking to do some home remodeling and hoping someone can share insight to ageng questions.

Not sure where to start… or what rates for a heloc are right now.

Hard money loan / Private Money Loan

HELOC's are harder to qualify for than mortgages. But you said you had used one previously, unless you changed homes you should still have one in place. You should have one ready anyway, great for emergency money, way cheaper than a credit card.
I had a friend who got a loan he could draw on from a bank to build a house. Like a fixed line of credit. Then he found the best cash back card out there, bought his supplies with the card, paid the card with the bank money, had enough cash back from the card use to take a family vacation after the house was built. He was the GC though, lots of banks won't loan to you if you are the GC on your own home.

401k loans are limited to 50% of account value or $50k, whichever is less.

Bump again. Anyone come across any HELOCs that you felt were great rates? What I have found is all in the 8%s so not sure if there are promotions with anyone or 8%+ is what I am getting.