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Updated almost 5 years ago on . Most recent reply
![James Nosack's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/1046408/1621508039-avatar-jamesn107.jpg?twic=v1/output=image/crop=750x750@0x263/cover=128x128&v=2)
401k to Buy Down Loan and Refinance Duplex
Hi BP Family,
I am kicking around the idea of drawing $20-25k from my 401k to buy down one of my loans on a duplex and refinance.
I purchased the property on an FHA two years ago. Although it is possible that my appraisal reaches the LTV required for me to walk into a 75LTV Fannie R&T, I am trying to come up with strategies if it does not appraise.
What I have decided is that I could pay down my loan $20k if I receive a conservative appraisal. This goes against the strategy of having my tenants pay down my loan for me.
The upside of following through with this means that if rates fall in the 2-3% range (what I am being told is possible) I would be saving $800-1,000 / mo. This increases my cashflow from 400/mo to 1200-1400/mo still budgeted all expenses.
This seems like a no-brainer to me but am curious on feedback. I don’t really have the bandwidth currently to pay this down with cash on hand. The updated 401k program for COVID waives the 10% penalty for early withdrawal. Also, if the dispersement is paid back to the account within 3 years it will remain tax exempt. I would not normally consider this strategy.
Thanks!
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![Dave Spooner's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/1670039/1621514650-avatar-davids1591.jpg?twic=v1/output=image/crop=1133x1133@90x11/cover=128x128&v=2)
@James Nosack Have you considered a self-directed 401k? It's a little more complex, but all of the appreciated value would be tax protected.
Your job situation may preclude it, but it's something worth looking into!