The Million Dollar Question: 401K Loans vs. Cash-Out Refinance vs. Selling Property Outright

401k Loan vs Cash-out Refinance vs Selling Property Outright

When it comes to retirement planning, there are a lot of options and strategies to consider. One question that often comes up is whether it’s better to take out a loan from your 401k, do a cash-out refinance, or sell property outright.

Each option has its own set of pros and cons, so it’s important to understand the implications of each before making a decision. Here’s a look at some key considerations to keep in mind when deciding whether a 401k loan, cash-out refinance, or sale is the right move for you.

401k Loan

Taking out a loan from your 401k can be a quick and easy way to get access to cash. And, since the loan is typically repaid with after-tax dollars, there’s no tax penalty.

However, there are some drawbacks to consider. For one, if you leave your job before the loan is repaid, you’ll likely have to repay the entire loan within 60 days or face taxes and penalties. Additionally, taking out a loan from your 401k can reduce the overall growth of your retirement savings.

Cash-out Refinance

A cash-out refinance allows you to tap into the equity you’ve built up in your home. This can be a good option if you need a large amount of cash and you have good credit and equity in your home.

However, there are some downsides to consider. First, a cash-out refinance can be costly – you’ll have to pay closing costs and fees. Additionally, this option can extend the term of your mortgage and increase the amount of interest you pay over the life of the loan.

Selling Property Outright

Selling property outright can be a good option if you need a large amount of cash and you don’t want to take on more debt. And, if you sell your primary residence, you may be able to take advantage of the capital gains exclusion and keep some of the proceeds tax-free.

However, there are some drawbacks to selling property outright as well. First, it can take time to find a buyer and close on the sale. Additionally, you may have to sell at a discount if you need to sell quickly. Finally, if you sell your primary residence, you’ll need to find another place to live.

The bottom line is that there are pros and cons to each of these options. It’s important to carefully consider your needs and objectives before making a decision. Speak with a financial advisor to get help evaluating your options and making the best decision for your situation.

Get Started