If you have been eyeing on that beautiful house listed on the real estate market, but you find yourself lacking the needed down payment for the home, you may find yourself tempted to withdraw from your 401(k) before retirement. Should you give in to the temptation?
The answer is no. Many advisers would tell you to keep your 401(k) strictly for your retirement. Trulia noted that there are several reasons why you should never use your 401(k) to pay for the down payment of your home.
According to the publication, the number one reason why one should not get their down payment from their 401(k) is because they most likely don't have the means to buy the house in the first place. You need to take this into consideration and see why you are not able to save up for your down payment and would have to go as far as borrowing from a 401(k).
"We strongly advise that you have other funds for [a down payment], because [borrowing from a 401(k)] can add a lot of financial stress," said certified financial planner Eric Freckman.
The publication further noted that if you lose or leave your job, then that could force you to pay back the outstanding balance within 60 to 90 days. Freckman also added that those who are unable to save up for the down payment may also have a hard time saving up for the costs associated with homeownership, which could then lead to more financial burden in the future.
As previously reported here on Realty Today, there are several ways to save up for the down payment on your dream home in two years.
Changing certain parts of your routine such as bringing in a packed lunch to work instead of dining out can help add more to your savings. It may also be great to find another apartment, which costs less than the place you're currently renting. You may also choose to reduce your retirement contributions in order to save up for the down payment.
