What market conditions would tip the scales for you to make borrowing from your own 401k a 'good' idea? The self-loan would help to increase the down payment and reduce PMI. Financially there is a lot at play: cost of PMI without the larger down payment; the 'double-tax' condition on the 401k loan; currently low mortgage interest rates; a recovering equities market and potential lost gains by removing the money from the equities market for 3-5 years; the current strong housing market; etc.
I am leaning toward taking the loan for the following reasons:
- Current low interest rates on mortgages.
- Interest from 401k loan (current @ 5.25%) is paid back to myself, compared with PMI payments that go to some insurance company.
- Strong housing market may more than make up for any missed opportunities in the equities market.
Looking forward to your thoughts. Thanks.