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I've reviewed your question, and I would hands-down go with the home equity line of credit for the 20% down
The interest would be tax deductible
I don't like 401(k) loans because if you leave the company, that loan money becomes income and you are taxed on it.
Well, that 401k has actually just been converted to an IRA, as I left that company 10 years ago.
Although you may not have plans to leave, unexpected things can happen -- and if that unexpected thing was to be separated from your employer, you wouldn't want a large tax bill on top of that.
Oh, you can't take loans from an IRA.
You could take a disbursement, but then you couldn't just put that money back.
It would be taxed.
And you can only put in a small amount every year
OK, so I do also have a smaller 401K with my current company that would cover the amount also. But it looks like the line of credit would be better. And I also could deduct the main mortgage interest from my taxes, even if it is a second residence, or investment residence?
Yes, the interest would be deductible. The interest for a second home is deductible just like your primary residence. An investment property with a renter would also be deductible, but you would deduct it on schedule E instead of on your itemized deductions on schedule A
So, any funds withdrawn from IRA or 401k are taxed at whatever bracket I fall into, and this is likely to be more than the monthly repayment on $25k or so I would take from a home equity loan, say at 4.5% or so.
I wouldn't say that the tax would be more than the monthly payment, but you have to factor in that you can no longer invest that money, so you are losing earnings each month.
However, you are 65 so you would not be penalized for the withdrawal...you would just have an extra $26,000 of taxes to pay this year.
I think I have enough info now to go on. Can I save the transcript of this chat? And can I ask further questions later? One other thing: if time is a critical issue, my guess is that I could get my hands on the cash from an IRA disbursement, than would be the process of taking out a home equity loan, right?
Sorry, I mean "get my hands on the cash quicker"
That would be correct. If time is critical you would get your IRA money quicker - probably within a few days.
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