Buy Down Mortgage / with 401(k) Funds / Retiring Soon

I am 62.  Going to retire in two years.  Should I buy down my mortgage now ($42,000) in order to refinance.  I would borrow  from my 401(k) monies--I have about $430k in the account.  Current interest rate on mortgage is 7%--30 Year, Interest Only in 10--will convert to fixed in 2016. I can refi now at a new interest rate of 4.75%--30 year fixed with a $600 per month savings but will also need to repay 401(k) loan.  The 401(k) repayment debt is about $400.00 per month with balance due at retirement.


I am not a fan of the debt. The good news is that the interest you are paying on that 401k loan does go back into your account. I current work with 401ks on a daily basis for a large financial firm. How do you feel about the risk? Do you have insurance that would help prevent foreclosure of something happened to your health? How long do you plan to continue to work? These are just a couple questions you might want to ask yourself.

Great question! I have a similar question. I'm 58 and 100% disabled per the VA and the SSA. I am buying a new, more accommodating home and still have my VA eligibility. I can get a 100% VA mortgage at 3.75% interest, 3.769% APR for a fixed, 30  year loan. I too dislike debt and the only long-term debt I have is two mortgages - one on an investment property, and the other for my current home which I will rent once I close on the new house. Rental income covers the mortgage on the first house and based on market analysis, I should be able to rent my current home to cover its mortgage payment.


I also have a USAA self-directed IRA but my return is less than 2% because I am a very conservative, risk averse investor.


Comparing my current IRA ROI and the new mortgage APR, it seems like making a large downpayment is a better use of funds. My initial analysis does not include the taxes I will have to pay on IRA withdrawals. As I am disabled, I do not pay a penalty on my IRA withdrawals.


Does it make sense to use part of my IRA to decrease the amount I borrow for  the house I'm purchasing?



Thanks for any insight offered. Jerome