You’ve finally found the home of your dreams.There’s just one thing standing between you and your new house:The down payment.
Many homebuyers today opt to use funds from their employer’s 401(k) program to come up with the down payment on a house.Ordinarily, you can’t take money from your 401(k) plan unless you retire, leave the company or become disabled, but many company plans permit certain “hardship withdrawals” when there is an immediate and heavy financial need, including the purchase of the employee’s principal residence.
The drawback to a hardship withdrawal is that you will pay taxes and penalties on the amount withdrawn from your plan, which often must be paid in the year of withdrawal.And while law allows hardship withdrawals, your employer is not required to provide them in your plan.Check with your employer’s human resources department if you’re not sure if your 401(k) plan allows certain types of withdrawals.
Another approach may be to borrow against your 401(k) – often as much as 50 percent of your account balance.Again, Check with your employer’s human resources department if you’re not sure if your 401(k) plan allows certain types of withdrawals.
