Contrasting 401K Loans vs. Selling Property Outright vs. Cash-Out Refinance

401k Loans: Pros and Cons

Weighing your options when it comes to how to best use your 401k can be a difficult decision. Some people may opt to take out a loan from their 401k while others may choose to sell property outright or get a cash-out refinance. Here are some things to consider when making your decision.

401k Loans:


-You can borrow up to $50,000 or half of your vested balance, whichever is less.

-The interest you pay on the loan goes back into your account.

-You have up to five years to repay the loan.


-If you leave your job, you generally have to repay the loan within 60 days or it will be considered a withdrawal and subject to taxes and penalties.

-If you can't repay the loan, it will be considered a withdrawal and subject to taxes and penalties.

-Taking out a loan from your 401k can reduce the overall growth of your retirement savings.

Selling Property Outright:


-You will receive the full amount of the sale.

-You will have no ongoing payments.


-You may have to pay capital gains taxes on the sale.

-You may need to find another place to live.

Getting a Cash-Out Refinance:


-You can receive a lump sum of cash.

-You may be able to get a lower interest rate than with a traditional mortgage.

-You may be able to extend the term of your loan, which could lower your monthly payments.


-You will likely have to pay closing costs.

-You may end up owing more than your home is worth if housing prices drop.

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