Home down payment - should I use my TSP money?

Home down payment - should I use my TSP money?
0

#1

Hello, I want to purchase a multi family house that requires a down payment of $25K. I would like to know the best route to take in purchasing this house. Here is my situation: 1) I’m in the military and have a bonus of $30,000 coming to me, but will receive it as $10,000 (taxed) each year. So far I have received the first installment, the next is December, 2) I have $24K in my TSP account. Can you please advise me on the best route to take, as this is a multi-family house that I intend on using as an investment. Thanks!


#2

Can you borrow from your TSP http://bit.ly/1MNScfk ? If so, you can borrow enough http://bit.ly/1QD89CR to pay the balance of the downpayment after the $10k bonus you’ve already received and pay it back with your upcoming bonuses. In the meantime, you’ll be making regular payments via payroll withholding.
If the TSP is the only resource you can turn to for the downpayment, tapping it for a loan is much better than depleting it AND paying the extra income taxes on the distribution.
Good luck and I hope this helps!


#3

I believe the TSP provides both general purpose and residential loans. As you are looking into investment property, the general purpose loan would be your only option. Keep in mind that you can only take a loan from TSP up to the amount you contribute plus growth allocated to your contribution, so you may not be able to access all of the funds in your account. You’ll need to check with TSP directly to determine your personal availability. If your TSP account is 100% your contributions plus growth on your contributions then it likely you will be able to pull together the $25,000 you need from after-tax bonus income and a TSP loan.
Check for more info at www.tsp.gov. The site also has contact info for TSP, which you may use.
Hope this helps!


#4

You’re not eligible for residential loan, but you may be eligible for the general loan. https://www.tsp.gov/planparticipation/loans/loanBasics.shtml
Still, it doesn’t look like a good idea to me.
You’re looking to leverage the real estate purchase by borrowing money.
But you don’t have enough for a down payment, so you want to leverage the purchase even more by borrowing from your retirement savings.
You may think that bonus money is guaranteed, but it’s not. I salute your entrepreneurial spirit–becoming a landlord involves hard work, risks, and possible rewards.
The problem is it looks like you can’t afford this right now. Take your time and save up for it. There will always be opportunities out there.


#5

If you take the money from your TSP, you will pay tax and a 10% penalty. So if you have $24,000 in the account you will probably net less than $20,000.
I realize this is probably a good investment for you. But you should find another way to get the money together. Since you have $20,000 coming on the bonus. See if you can do a lease option and take the bonus money to put down.
Maybe the owner will take back a second and let you pay it down as you receive the bonus. If you need the down to finance the purchase, do an AITD (All inclusive trust deed) with the seller. They keep the mortgage until you pay off the second. Then you can refinance.
If you get a creative broker, you can find a way to make this work without pulling from the TSP.


#6

This thread has been closed. Have a financial question? Log in and ask our community!