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Old 10-09-2009, 06:04 AM   #21
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Originally Posted by Bestwifeever View Post
People seem to borrow from their homes (heloc, refi's) to invest in the markets and otherwise; I don't know why the reverse (borrowing from your TSP investments to invest in a home) would be materially different if there is no tax hit for using the TSP for a down payment. And then you could refinance/get a heloc on that home and put the money from that back into savings/tsp/general investments.
But the HELOC rates are floating. Are you sure you want to get a HELOC, invest in a TSP where you can't easily get the money out, then see your HELOC rates go up to higher rates than what you're earning in the investment account, then not be able to easily get the money out of the TSP to pay off the HELOC?

Sounds quite dangerous to me.

A home is a secured asset. The loan from the bank is secured by a mortgage deed. This is why it's different than an investment account like a TSP. There are people out there who did exactly what's described above by borrowing via a HELOC, investing, then the market went down 55% through March of this year, their HELOC rates went up, and now what do they do? That was the biggest financial blunder of their life.

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Old 10-09-2009, 10:43 AM   #22
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Finance Dave, personally for me taking $ out of my house with a heloc or refi and putting into anything other than my house was never an option for me. DH and I are financial idiots and we would have doubtless been caught in exactly the scenario you describe. But many people do it and it has worked for them.

So I'm just thinking the same thought process could apply to the opposite--take money from investments and use it to buy a house. I was sort of kidding about later taking the money from the house and investing it back into tsp or the markets, but it seemed a pseudological extension.

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Old 10-09-2009, 05:30 PM   #23
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Normaly I wouldn't touch the TSP for other acquisitions but your case seems to have enough cash flow and diversification that taking part of the TSP for a real estate purchase does makes sense, but its sort of at a break even point so go with what feels better since the usual disclaimers about TSP withdrawals are quite mitigated.
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Old 10-10-2009, 09:37 PM   #24
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Originally Posted by Fireup2025 View Post
My understanding is cashing some of it out for a home purchase saves you from early withdrawal penalties. Where else do I have a suitable downpayment of $50-100K, definitely not in regular savings??!! Welcome to NJ!
if i remember correctly when you are withdrawing the money from the TSP you will have to pay taxes and (if you are under 55/59.5) a penalty

Originally Posted by Fireup2025 View Post

Thought the withdrawal or loan was equally tragic to the end - but I don't use my TSP for any of my retirement calculations since I have the it would just be used for sailboats, RV upgrades, vacations, etc...

actually a loan isnt all that bad, you are borrowing the money from yourself and therefore paying yourself interest (at the G fund rate) which you can probably deduct on your taxes, since the loan is for real estate. and since it isnt a withdraw you dont pay a penalty.
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Old 10-11-2009, 12:22 AM   #25
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Originally Posted by Fireup2025 View Post
Home or TSP/DC?
Good point-- touché!

There are probably hundreds of right answers. I know that so far you've kept coming back to NJ after each demob, and you probably have reasons to attract you to the area. Are you likely to stay there for another decade or so to make the closing costs worth the expense over renting?

What would you do if you're mobilized again for 12-15 months? Rent it out furnished? Leave it to the care of a trusty roomie? Many home-insurance policies require the place to be occupied at least every 30 days, although this would only be held against you if a claim arose.

You've probably already thought about how you're going to title the place.

If you're purchasing a home strictly for financial reasons then a lot of homeowners neglect the "ownership costs" when they compare to renting: property taxes, maintenance (like a new roof every 20 years), appliances, repairs, community association fees/assessments, expansion/upgrades, and yard maintenance to name a few. But the emotional considerations may be equally important.

I've never heard of being able to make a TSP withdrawal for a home purchase, but there do seem to be loan provisions:
TSP: ; 2008 Sep 18
TSP: FAQ, How Do I....?; 2008 Sep 18

Gosh, now you're going to have to go read all the freakin' threads on whether to pay off your mortgage or invest the money...

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Old 10-11-2009, 05:06 PM   #26
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Not sure, but I think it was me that brought up the loan vs. withdrawal consideration. I did so ONLY because either action should only be considered when no other options are available and the loan is easier to reverse (i.e. early payoff) than the withdrawal. Also, the loan has no tax implications other than double taxation on the so-called "interest" which is trivial IMO. I always mention that these are not really loans since you are liquidating assets to produce the funds, and jdw fire has the right idea to liquidate a cash or bond fund assets to keep the true cost reasonable.

As far as TSP loan provisions, I see in the link Nords provided that TSP does have an extended repayment term for loans to fund a home purchase:
There are two types of loans:
General purpose loan with a repayment period of 1 to 5 years. No documentation is required.
Residential loan with a repayment period of 1 to 15 years. Documentation is required.
A residential loan can be used only for the purchase or construction of a primary residence. ......"
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Old 10-11-2009, 08:27 PM   #27
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I take it from your post that you're under 59.5. If that's the case the only option you have to tap into your TSP is to take a TSP loan. You can only take an in service withdrawal if you're at least 59.5, and can only do it once. There are TSP hardship withdrawal provisions but buying a house is not one of them.

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