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401k Loan vs. Cash Refinancing

If you a homeowner, who needs money, consider the 401k loans and cash out refinancing options that provide access to funds quickly. If you are looking for a way to raise needed cash, you may be looking at extracting cash from your home's equity or your account. Before you make a decision, it is important to go through the exercise of comparing 401K loan to a cash refinance loan. You will find that a cash refinance has certain advantages. A cash refinance loan comes with a tax deductible status in most cases. When you get a refinance mortgage loan and take some equity out as cash, you are essentially replacing one mortgage with another. You just get a lump sum of cash as part of the transaction. You can deduct that mortgage from your income taxes if it is your primary residence.

Comparing a 401K Loan to a Cash Refinance Loan - Advantages

When comparing a 401K loan to cash refinancing, you will find some nasty surprises. With 401K loan, you have to pay it back within 90 days or pay the taxes in full. 401K loans allow you to put money aside tax free until retirement. If you take a loan from it before you retire, you will have to pay it back within 90 days. If you do not, the government will require you to pay taxes on the amount you borrowed. You will need to add the amount of the loan to your annual income amount and pay taxes on that additional sum. It can be quite a surprise to many. With a cash refinance loan, that does not happen. Outside of paying fees on the loan, you just keep making your mortgage payments and do not worry about additional tax penalties.

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When comparing a 401K loan to a cash refinance loan, you need to think about how long you will have to repay it. You get a longer repayment time with a cash refinance loan. With a 401K loan, you have to pay the loan back within 5 years. With a cash refinance loan, you have the length of the entire mortgage to repay it. If you take a 30 year mortgage, you have 30 years to make the payments back. Our team can help you get the current mortgage refinancing rates so you can shop lenders online with confidence.

This extended period makes a cash refinance loan easier on most people's budgets. It is very likely that a money mortgage will have lower payments as well. Think about it. You can pay the amount back in 5 years or in 30 years. When comparing 401K loan to a cash refinance loan, you need to think about repayment length and amounts.

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