I want to take advantage of new rule and take out certain amount from my 401 k and use it to decrease my mortgage principal so I can re-finance to get lower interest rate and change mortgage from 30 to 15 yrs. Without paying off certain portion of the principal, monthly payment won't be as manageable as they are now, and I don't have any other funds to use. Changing mortgage from 30 to 15 years saves approx. 100,000 $ in interest over 30 years of the mortgage. Not to mention that bigger portion of your monthly payments is going towards your principal.
Currently my 401 K is mostly in cash funds and gives 1% return. I am not comfortable moving it back to stock market any time soon.
Also, I have "rainy day" fund that I want to keep for now but might use to repay the 401 K withdrawal when the economical situation becomes more stable.
My lender quoted me 2.875% for 15 yrs mortgage vs. 3.875% that I am paying for 30 yrs currently.
Any pitfalls I haven't thought of? Anyone has already used their 401 k in this way?
Currently my 401 K is mostly in cash funds and gives 1% return. I am not comfortable moving it back to stock market any time soon.
Also, I have "rainy day" fund that I want to keep for now but might use to repay the 401 K withdrawal when the economical situation becomes more stable.
My lender quoted me 2.875% for 15 yrs mortgage vs. 3.875% that I am paying for 30 yrs currently.
Any pitfalls I haven't thought of? Anyone has already used their 401 k in this way?
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