Purchasing A Home Using Your Roth IRA

So you are thinking of buying a new house.. Congratulations! Now that you’ve decided to take this step, you have to ask yourself how you will pay for it. Including the process of selling your existing home, this could be one of the most intimidating steps in the home-buying process, but making a plan can help to ease your mind!

Let’s say you decide you want to use money from your Roth IRA. If you are considering this option to buy a house, you must be a first-time homebuyer, or you haven’t owned a home in the last two years.  If you are married, you would both need to qualify as first-time home buyers to meet the requirements. 

So how much money can I use exactly? You can actually withdraw up to $10,000 without penalty for a down payment on a house IF you are a first-time home buyer AND you have had the IRA for at least five years. ¹  You may be able to take more depending upon how much of the account is made up of contributions and how much of the account is interest earned on contributions.

Making a Roth IRA withdrawal for a down payment on a home may or may not be a good idea. It all depends on how long you’ve had the IRA, how much is in it, and where the balance in the account came from.

Another viable option for some people is to take a loan from your 401(k) instead of withdrawing money from a Roth IRA. Although you will have to pay interest on the loan, you are generally able to borrow up to 50% without incurring taxes or penalties. ² As always, it’s incredibly important to make sure you make your monthly payments on time to avoid late payment penalties.

The best thing to do would be to sit down and figure out what is going to be the best for your personal situation. If you are confused or need guidance, there are professionals out there who could help guide you in the right direction.

If you have any financial questions or think The Resource Center could be of service to your financial planning journey, come by our office anytime or call 417-882-1800 to make an appointment. As always, tune into Bruce’s show “Dollars and Sense”  on Tuesdays at 3pm on Ozarks Live, or visit our blog page or Youtube channel to view past episodes!

Additionally, if you would like to schedule an appointment with our advisor, Brue Porter, online please click this link to view his current schedule of availability.

Sources:

1. https://www.rothira.com/blog/should-i-use-a-roth-to-buy-a-house

2. https://www.investopedia.com/articles/personal-finance/110415/can-you-use-your-ira-buy-house.asp

 

Investing involves risk, including the potential loss of principal. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.   

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice.  Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.  Our firm is not affiliated with the U. S. Government or any governmental agency.  Investment advisory services offered only by duly registered individuals through (AEWM).  AEWM and The Resource Center are not affiliated companies. 740299