Second Home - Down Payment

[Jerika Demos]

Hello everyone! 

My husband and I are interested in purchasing a third property as a Second Home.  Although we are willing to wait to make the purchase until we have the full 10% down, we would prefer not to.

We currently own two homes:

Investment (LTR) - we did a cash out refi at the end of last year.

Primary Residence - We went under contract in Sept. '21 and closed March '22, which gives us +/- $100,000 in equity. I am currently working to see if a HELOC is even a possibility with this property yet. I am thinking not likely, but I had to at least ask.

My husband does have a 401k, which we gave a quick look at pulling money from for a down payment, however the tax penalties would only provide us with a loss. 

Taking a personal loan out could be an option. What other suggestions might you all have? 

Thank you very much for your input and time. 

<3 JD

[Patricia Steiner]

If your house is under contract, a HELOC isn't an option. Borrowing a down payment isn't an option - you need to have vetted funds (in a bank/stock/investment account). You've already did a cash out refi on the other property so that's not an option. I recommend taking a loan from your 401k - A LOAN. Here's an article on it (please scroll down about mid-way on the page):

https://www.fidelity.com/viewp....

You'll avoid the tax consequences as long as you pay it back - and that buys you time to close on your current home to use those proceeds.

Do the research on the employer's plan to have a good understanding of the mechanics.  Hope this helps.