Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
There are advisors in cities around you but I needed services of one who can guide me irrespective of location. Natalie Lynn Fisk comes highly recommended especially in times like this. I am hedging and haven't lost much to the recession. I found her in 2020 when the market was at an all time low. Look her up and thank me later.
I've come to realize that the key to amassing wealth lies in making sound investments. I purchased my first home at the age of 21 for $87,000 and sold it for $197,000. My second home, acquired for $170,000, was later sold for $320,000, and my third property, purchased at $300,000, fetched $589,000, with buyers covering all closing costs and expenses. Not reaching a million before retirement feels like an unfulfilled goal.-.
I initially started my investment journey with the guidance of a financial advisor named *Jenny Pamogas Canaya.* Her transparent approach granted me full control of my investments, and her fees are reasonable, considering my return on investment. Nonetheless, it's crucial to conduct thorough research before engaging with any financial advisor.|.
Omg! I love the informational content! I am a first time home-buyer closing in less than thirty days. I learned so much and you guys broke it down and made it easy to understand. New subbie I am!
So you two are making another major assumption that the potential homeowner would never in those ten years make another contribution to their 401k. If you wanted to be accurate about it calculate your return from the market as if you were contributing 4% of your income yearly. That doesn’t even include any potential employer match and most plans match up to 4% at least giving you 8%. I make less than 50k and have been contributing regularly to my 401k for 10 years and my net worth is more than both examples combined and one owns a house much nicer than I can afford. Obviously I see the value of what you are saying but I think the approach to this equation is focusing on the wrong piece of the puzzle. The 401k contributor should contribute regularly the entire time. Start at the point in the 401k that you could potentially make a 12k withdrawal (24k) then have one example take the withdrawal and the other doesn’t. Both contribute their lifetime. Then show us the next 30-50 years in the same spreadsheet format presented here. If the contribution amount matched what a homeowner would have to make to afford that home then that would be a real world equation.
Must also consider not only are you continuing to contribute but it's a loan so arent you also paying yourself back for that loan ? They also don't mention property taxes.
Would not the homeowner continue to make same contributions after the initial loan for the home? Seems like they would balance each other out. So the analysis was focused on just the initial investment
@@glowchet did they not say that your payments will be the same as rental?. Your rental would have gone up in rent same as property tax. So it is included in their math
What about if you got your 401k than same money than the house value 300 k in the 401k 10 % going to be 30 k the first year And in 10 years going to be 300 k in your 401k
My husband is thinking about paying off our home ($140) with his 401k so he can put it up for rent while we get a second home. He works and I stay home with 2 kids on the spectrum. The rent will pay the mortgage for the second home. Is this a good idea? What do y’all think ?
I got the 401k loan disbursed to my account and the house construction still has 4 months to go. I haven't closed on the home yet. Can I pay it back and get it again in 3 months?
I'm trying to buy a piece of property that has an older manufactured home that can't be financed but the property is being sold for less than the going rate in the area. So want to get a loan for the property and bonus there is a livable mfg. Really having a hard time finding financing for this and wondering if it can be done this way. Or what type of loan I cam get for property. Very confused 1st time buyer with a potential good deal.
If you borrow from your 401K, the amount you borrow is no longer compounding correct? If this is correct, doesn't that defeat the purpose of allowing the money to compound?
Good question. For example, If you borrow $50,000 (which is the max allowed by the rules) against your 401K then $50,000 of your investments will be liquidated in your 401K. So, you are correct, someone who borrows $50,000 from their 401K will not see any 'gain' or 'loss' that would have occurred if that amount was invested in the 401K. Any interest charged on the outstanding loan balance is repaid by the participant into the participant's own 401(k) account, so technically, this also is a transfer from one of your pockets to another, not a borrowing expense or loss. The 401K loan should not be done lightly, and it should always be done with the mindset of paying it off as soon as possible. Ideally homeownership and retirement investing are both long-term endeavors. Taking the 401K loan will diminish your stock market exposure but it will also increase your exposure to real estate appreciation. In the long run both markets (stock and real estate) should see appreciation and whatever gain that was potentially lost in the stock market would likely be offset by the real estate appreciation. We believe that homeownership is important to the long-term quality of life of a person and when it is done responsibly, a 401K loan can be a good option. Disclaimer, this is not financial advice, it is for informational purposes only. We recommend all homeowners seek financial consultation from a licensed professional.
I heard you can still withdraw from your 401k without the penalty and up to 100k and i was wondering the manufactured house i want is 100k plus land like 2 acres for 35k and install fees and i have 24k in savings and like 89k in my 401k. took me like 9 years to build at 34. do you think it would be a good ideal to take it all out and try to pay most the house off and only owe for the land and install install fees and whatever is left over in the house. figued my bill would go from 1300 to like 600. Or do you think it would be best just to withdraw the 20% for the house and keep the rest in the 401k.
In situations like this where a borrower has the option to leverage significant assets on a down payment, we generally recommend applying closer to the minimum amount required. Especially since the source is a 401K.
@@devilboykillz I see I looked on Empower website says it has to be IRA hardship with out penalty or I would have to do a withdrawal or loan with 401k. I don’t currently have IRA 🥹
Hi, I’m currently buying a house march 2023. My 401k has taken a 7% loss from a year ago. My portfolio is not diverse. I COULD borrow up to $23,000 for a principle residence loan on my 401K. I am tempted to take the loan for the closing costs only, $9500. Would this be a safe investment, while diversifying my investments? I am not financially savvy and paying the remaining $6500 out of pocket would exhaust a majority of my cash supply. Is taking the loan from my 401k the best option?
Hello Alex, this is a really good question and it is hard one to answer without knowing all of your details. In general, taking funds from your 401K (as a loan) can be a good option if you intend to hold the property for a minimum of 5 years. The reason why we say that is because we don't want to advise taking funds from a 401K to do anything with a short term time horizon. Might be a good idea to consult with a financial advisor as well on this. Disclaimer, this is for information purposes only and not financial advise.
Yeah, the average S&P500 Index fund has gone up 10.7% annually over the past 10 years. Over the past 30 years, that number crashes down to 9.89%. What a horrible example they used. 🙄
Hi Dee. Regarding your question, quitting a job is no problem as long as the borrower did not intentionally withhold important information from the bank. For example, if a borrower knew he was going to quit his job the day after his home closed and the bank finds out, their could be an issue if the bank feels like the borrower was lying or withholding that info. Let me know if that makes sense.
@@JavierG26868 - They are doing an "all in" calculation to include property taxes, which is indirectly in the rent but not paid directly by the tenant.
Be sure to differentiate between a loan and a distribution - in many/most cases, a 401(k) can be completely distributed. Perhaps you want to make a large down payment and withdraw $250,000 from your IRA or 401(k) - OK, just pay your taxes...
My husband is thinking about paying off our home ($140) with his 401k so he can put it up for rent while we get a second home. He works and I stay home with 2 kids on the spectrum. The rent will pay the mortgage for the second home. Is this a good idea? What do y’all think ?
Hello @agemar that is a really good question and needs to be discussed at a deeper level to ensure it makes good financial sense for your family. We would be happy to discuss this with you. Please feel free to email us at team@azmortgagebrothers.com
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?
There are advisors in cities around you but I needed services of one who can guide me irrespective of location. Natalie Lynn Fisk comes highly recommended especially in times like this. I am hedging and haven't lost much to the recession. I found her in 2020 when the market was at an all time low. Look her up and thank me later.
I am on her site doing my due diligence. She seems proficient. I wrote her an email and scheduled a phone call. Thanks for sharing
I've come to realize that the key to amassing wealth lies in making sound investments. I purchased my first home at the age of 21 for $87,000 and sold it for $197,000. My second home, acquired for $170,000, was later sold for $320,000, and my third property, purchased at $300,000, fetched $589,000, with buyers covering all closing costs and expenses. Not reaching a million before retirement feels like an unfulfilled goal.-.
I'm exploring different investment opportunities and would appreciate others' insights on this matter._.
I initially started my investment journey with the guidance of a financial advisor named *Jenny Pamogas Canaya.* Her transparent approach granted me full control of my investments, and her fees are reasonable, considering my return on investment. Nonetheless, it's crucial to conduct thorough research before engaging with any financial advisor.|.
Omg! I love the informational content! I am a first time home-buyer closing in less than thirty days. I learned so much and you guys broke it down and made it easy to understand. New subbie I am!
Wahoo! that's great Erica. Best of luck to you. If you need any help just reach out to us at team@azmortgagebrothers.com
Thanks! Very informative analysis. I'd love to see a continuation of this series where you discuss the cost and process of repaying a 401k loan?.
Also isn’t there a penalty and taxes for taking that money out? Or was this example on a loan from the 401k only.
Thank you!
Very helpful info!
With the CARES act and no penalties of withdrawal, since I took a paycut, I'm definitely considering this as I am a first time home buyer
Great info. You help me decide on what to do, which is go forward with the 401k loan. Thanks
Awesome. Glad we could help ☺️
So you two are making another major assumption that the potential homeowner would never in those ten years make another contribution to their 401k. If you wanted to be accurate about it calculate your return from the market as if you were contributing 4% of your income yearly. That doesn’t even include any potential employer match and most plans match up to 4% at least giving you 8%. I make less than 50k and have been contributing regularly to my 401k for 10 years and my net worth is more than both examples combined and one owns a house much nicer than I can afford. Obviously I see the value of what you are saying but I think the approach to this equation is focusing on the wrong piece of the puzzle. The 401k contributor should contribute regularly the entire time. Start at the point in the 401k that you could potentially make a 12k withdrawal (24k) then have one example take the withdrawal and the other doesn’t. Both contribute their lifetime. Then show us the next 30-50 years in the same spreadsheet format presented here. If the contribution amount matched what a homeowner would have to make to afford that home then that would be a real world equation.
Must also consider not only are you continuing to contribute but it's a loan so arent you also paying yourself back for that loan ? They also don't mention property taxes.
Would not the homeowner continue to make same contributions after the initial loan for the home?
Seems like they would balance each other out. So the analysis was focused on just the initial investment
@@glowchet did they not say that your payments will be the same as rental?. Your rental would have gone up in rent same as property tax. So it is included in their math
What about if you got your 401k than same money than the house value 300 k in the 401k 10 % going to be 30 k the first year And in 10 years going to be 300 k in your 401k
You need to add, bills for water, garbage, taxes…you dont pay. Those when renting.
My husband is thinking about paying off our home ($140) with his 401k so he can put it up for rent while we get a second home. He works and I stay home with 2 kids on the spectrum. The rent will pay the mortgage for the second home. Is this a good idea? What do y’all think ?
great point about the 10 year periods. we have fewer than we think.
I got the 401k loan disbursed to my account and the house construction still has 4 months to go. I haven't closed on the home yet. Can I pay it back and get it again in 3 months?
I'm trying to buy a piece of property that has an older manufactured home that can't be financed but the property is being sold for less than the going rate in the area. So want to get a loan for the property and bonus there is a livable mfg. Really having a hard time finding financing for this and wondering if it can be done this way. Or what type of loan I cam get for property. Very confused 1st time buyer with a potential good deal.
Thank you! I learned a lot ! :)
If you borrow from your 401K, the amount you borrow is no longer compounding correct? If this is correct, doesn't that defeat the purpose of allowing the money to compound?
Good question. For example, If you borrow $50,000 (which is the max allowed by the rules) against your 401K then $50,000 of your investments will be liquidated in your 401K. So, you are correct, someone who borrows $50,000 from their 401K will not see any 'gain' or 'loss' that would have occurred if that amount was invested in the 401K. Any interest charged on the outstanding loan balance is repaid by the participant into the participant's own 401(k) account, so technically, this also is a transfer from one of your pockets to another, not a borrowing expense or loss. The 401K loan should not be done lightly, and it should always be done with the mindset of paying it off as soon as possible. Ideally homeownership and retirement investing are both long-term endeavors. Taking the 401K loan will diminish your stock market exposure but it will also increase your exposure to real estate appreciation. In the long run both markets (stock and real estate) should see appreciation and whatever gain that was potentially lost in the stock market would likely be offset by the real estate appreciation. We believe that homeownership is important to the long-term quality of life of a person and when it is done responsibly, a 401K loan can be a good option. Disclaimer, this is not financial advice, it is for informational purposes only. We recommend all homeowners seek financial consultation from a licensed professional.
Thanks for the info!
Any time! 😀
I heard you can still withdraw from your 401k without the penalty and up to 100k and i was wondering the manufactured house i want is 100k plus land like 2 acres for 35k and install fees and i have 24k in savings and like 89k in my 401k. took me like 9 years to build at 34. do you think it would be a good ideal to take it all out and try to pay most the house off and only owe for the land and install install fees and whatever is left over in the house. figued my bill would go from 1300 to like 600. Or do you think it would be best just to withdraw the 20% for the house and keep the rest in the 401k.
In situations like this where a borrower has the option to leverage significant assets on a down payment, we generally recommend applying closer to the minimum amount required. Especially since the source is a 401K.
thought it was 10k if you was gonna purchase a home
@@BronzeGirl no. it depends on you really. They are telling me to get a state benefit of 10k i have to have less than 10 k in my savings account.
@@devilboykillz I see I looked on Empower website says it has to be IRA hardship with out penalty or I would have to do a withdrawal or loan with 401k. I don’t currently have IRA 🥹
Great discussion… thanks for making an excellent compare & contrast.
Hi, I’m currently buying a house march 2023. My 401k has taken a 7% loss from a year ago. My portfolio is not diverse. I COULD borrow up to $23,000 for a principle residence loan on my 401K. I am tempted to take the loan for the closing costs only, $9500. Would this be a safe investment, while diversifying my investments? I am not financially savvy and paying the remaining $6500 out of pocket would exhaust a majority of my cash supply. Is taking the loan from my 401k the best option?
Hello Alex, this is a really good question and it is hard one to answer without knowing all of your details. In general, taking funds from your 401K (as a loan) can be a good option if you intend to hold the property for a minimum of 5 years. The reason why we say that is because we don't want to advise taking funds from a 401K to do anything with a short term time horizon. Might be a good idea to consult with a financial advisor as well on this. Disclaimer, this is for information purposes only and not financial advise.
Hi Alex, what state are you purchasing in?
Can you do this without a tax penalty in 2022?
You should not have stated that the 401k fund will appreciate by 10% a year, that simply is not the case.
Agree 100%. No one can predict the future. Very bad advice.l
Yeah, the average S&P500 Index fund has gone up 10.7% annually over the past 10 years. Over the past 30 years, that number crashes down to 9.89%. What a horrible example they used. 🙄
if you quit job do they own your house ?
Hi Dee. Regarding your question, quitting a job is no problem as long as the borrower did not intentionally withhold important information from the bank. For example, if a borrower knew he was going to quit his job the day after his home closed and the bank finds out, their could be an issue if the bank feels like the borrower was lying or withholding that info. Let me know if that makes sense.
@@TheMortgageBrothersTeam VERY HEPFUL I live
umm, property taxes?
I believe in this assumption that the property tax + PMI is rolled into the "same" monthly cost for your mortgage vs your monthly rent.
@@JavierG26868 - They are doing an "all in" calculation to include property taxes, which is indirectly in the rent but not paid directly by the tenant.
No mention of taxes or penalties.🤔
I think it's because they are talking about taking a loan out from 401k as opposed to a withdrawal.
What happens if you buy the home and don’t take out a loan but pay cash for the house from your 401k
Max 401k loan is $50k :)
Be sure to differentiate between a loan and a distribution - in many/most cases, a 401(k) can be completely distributed. Perhaps you want to make a large down payment and withdraw $250,000 from your IRA or 401(k) - OK, just pay your taxes...
Bad
I’m at 11-44 still no idea id they answer the question, get to the point already
My husband is thinking about paying off our home ($140) with his 401k so he can put it up for rent while we get a second home. He works and I stay home with 2 kids on the spectrum. The rent will pay the mortgage for the second home. Is this a good idea? What do y’all think ?
Hello @agemar that is a really good question and needs to be discussed at a deeper level to ensure it makes good financial sense for your family. We would be happy to discuss this with you. Please feel free to email us at team@azmortgagebrothers.com