refi borrowing from SRA?
I've got a close friend who I advise on money matters and could use the wisdom of this group. I realize that a full analysis requires looking at the entire picture, but in this case, I'm looking for thoughts in a more narrow way.
Situation: person is nearing retirement and has a home with a mortgage at a fairly high interest rate (let's say 7%). Would like to refi but doesn't have much post-tax cash on hand and, thanks to bad luck in purchase timing, has essentially no equity in the home (value dropped by original down payment amount).
This person has substantial pre-tax investments, including an SRA, and is old enough to withdraw without penalty. But, the person is still working and is highly compensated, such that any withdrawal would be taxed at a high marginal rate.
Apparently they can borrow from the SRA at around 7% and, as long as the loan payments are made on time, the money is tax-free. It seems to make sense to borrow from the SRA 10%-20% of the remaining mortgage in order to be able to refi down to 3.5-4%. Thoughts on this generally? More specifically, I'm not super-familiar with SRAs, so any other things to consider there?