I've searched high and low for an answer on this and can't find anything. I talked to my 401k folks on Friday and they said no. I can only use the loan to buy a new primary residence. I don't understand what the difference between doing that and just doing a refi of my house and transferring everything into my name. Seems to me they are the same. The federal tax code says I can do it only to purchase a primary residence. The benefit of doing this versus and standard 401k loan is that the the terms can go up to 20 yrs vs 5 yrs for the standard loan.

I fought to keep my house and now I don't want to give it up but I'm not gonna take a huge loss either. I need the loan to bridge a couple years of unexpected daycare expenses.

If anyone has found any good info on this sort of thing and could point me to it, that would be great!!!

Thanks

Are you in the US? Consider how much real equity is in the house. Also, since it appears you are only separated, you can wait to see what bears out in divorce court. Also consider your annual income, and the hit you may take on taxes from a simple early withdrawal (I don't have experience on a 401k withdrawal, but do on an IRA rollover account, and what we withdrew made a miniscule hit on our taxes, considering the alternatives). A withdrawal may be more beneficial than a loan, because it rips off the band-aid quickly and you don't have to think about it after it's done. But to me, the first thing to do is wait for a court order for a buy-out of equity, because the last thing you want to do is pay someone half of the equity and then have them still legally own half the house because it is community property.

The restrictions are your employer's decision not law.

http://www.401khelpcenter.com/loans.html#.UPIOxY6zdzQ

http://www.401kgps.com/retirement-basics.aspx

Why don't you re-fi???

Thanks BR & CWMI,

I'm in the US. Possession of the house is already covered in the SAPS. I'm trying to execute and prepare for divorce filing on Feb 1. My attorney has asked that we have all the property divided before then.

Thanks for the info. I've got everything setup for the re-fi and thats good to go. Currently we are bickering over the price of the house. I had it appraised in March and then recently re-appraised for the re-fi. The value of the house has gone up by 60k so that is what the bickering is about (How much equity there is). The difference is market appreciation and just differences between appraisals.

BR, as you may recall, I've got some "new" daycare expenses that I will have to cover. For my 3.5 year old and infant, the daycare is $2300 per month. I need about 20k to cover the next 2.5 years (until the 3 year old goes to school - her birthday is just after to kindergarden cutoff date .

The loan is the simplest way to cover and the 20k will not have any significant impact on my overall 401k.

The nice thing about the 20k on the primary resident is that there is no penalty (other than potential loss in investment gains/losses) and I can extend the terms up to 20+ years. They did say I could just do a traditional loan for 5 years or just take a withdrawal (withdrawal would be a 40% tax and penalty hit). I could roll over into a IRA and maybe save a little on taxes).

I've done a very detailed budget and I'm upside down by a few hundred per month over the next year and then it goes down. So my goal is to bridge that for a couple of years.

I may just sell the house. Thats a hard one for me given everything I went through to keep it. Its also been the one stable thing in my girls life. I've mentioned selling it to my DD8 and its the only thing that's made her cry wrt divorce.

Thanks

It would seem to me that when I re-fi it would be the same as purchasing the house from her as my primary residence. Ill call the 401k folks back tomorrow and talk to someone different. See if they have a different answer.

I'll also just add the divorce laws in NC are screwed up... Makes me mad every time I go over them. No one cares, all I get from my attorney is its the law....

I put my wife through law school and one year of college. She now makes a really good salary and I'm still paying around 3k more than she is in support (CS and daycare).

I don't understand why there is not reverse alimony?? She is getting a nice new house that I expect she will be living in with her boyfriend (can't prove it until he moves in) and I get to pay for it. Yippie....

I understand the whole concept of CS but the tables they use in NC are BS. The tables say its 3k per month for two children based on combined income and then they multiply it by 1.5 cause we have split custody. Does it really take 4500 for a homes, food and clothes? All other expenses including daycare are in addition to the basic CS Obligation. Its nothing more than a scheme to equalize income and gives no consideration to the facts.

I can take a ED issue before a judge, but that could go either way and just prolong the inevitable.

Sorry for the rant

It's possible you could take out a personal (or general) loan from your 401k, but repayment usually has to be done within 5 years instead of 15 or else the unpaid portion is considered a disbursement. The snag with this is that usually you have to get a waiver signed by your spouse saying its okay for you to take the loan.

What they told me is I can sell this house and go buy a new primary residence and I'm good. If I buy my WWs half of the equity via re-fi that doesn't count. I dont understand the difference in the types of transactions and of course why buying her half would not be considered purchase of a new primary residence. There must be something different in the paperwork required.

Yes, this is most likely what I'll do assuming they are right about it has to go to the purchase a completely new and different house BUT I'd rather spread it over 20 years so I can keep the payments lower for the next two.

Other option is to roll 20k over into a IRA and then take yearly withdrawals from that. This option may be helpful if I were to just do the withdrawal and not worry with paying it back.

You may have already accounted for this but make sure you are giving your stbxWW only the equity she would have walked away with had the house sold...consider the sales commission and closing costs that would have been incurred...or else you are giving her too much.


Ask HR/401k folks for the written policies re: loans. They can tell you all sorts of stuff that is wrong. Request the black and white policy.

Up here in Alaska it's the same, you take yourincome, then you multiply it times a percentage for the number of kids you have. So 2 kids would be 27%. Once you have the amount that you both 'owe' the kids, then you figure out how much time each of your have. You multiply the percent of time by the amount you owe. Once you have what you owe for both you and your spouse according to the number of kids and time you have with them you subtract the lesser from the greater, then multiply by 1.5.

The idea is that it costs more money to have a split home than single home, which makes sense, but why they make the person with the larger income pay 50% more is lame.

The only way to get around this is to have incomes that are similar as that 50% becomes less significant. In my case, I make more than the income cap and my ex-wife barely makes anything, so I am paying a lot. That said my youngest doesn't want to live with her so I have full physical of him, which made a huge difference because for him she has to pay the 50% to me since I don't owe any child support for him.

If I was you I would strongly consider selling the house. I know it will be hard on your kids, but if you can't afford it, it may not be worth it, and it will make things easier if you live in a smaller place and aren't so strapped financially.

Divorce for a while will be hard, but in a few years you will be back on your feet and able to buy a new place.

ak