I want to use the money in my TSP to make a downpayment on a home. Is this a good idea?

I want to use the money in my TSP to make a downpayment on a home. Is this a good idea?
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#1

I am 64 and a full-time FERS employee. I plan to work until about age 69. My current rent is $970/month. Everything I have been reading indicates it would be better to buy. I want to take a loan from my TSP to buy, and avoid PMI. I don’t have the money for a down payment without using my TSP. Also, should I put down the minimum the bank will allow, or the full 20%?


#2

The TSP is a great retirement program, in my opinion. Good choices of funds and very low expenses to manage them.
Have you checked here for the details? https://www.tsp.gov/PlanParticipation/LoansAndWithdrawals/loans/applyingForALoan.html#residentialLoanDoc
This book from the TSP contains information on repaying your loan and what happens when you leave Federal service. https://www.tsp.gov/PDF/formspubs/tspbk04.pdf
I am assuming you have looked in your locale to see what you can get for a mortgage payment which is around the current rent payment, or its’ after tax-equivalent. My understanding is that unless you make a down payment of at least 20% you will be charged PMI. Also, be sure to go to your financial institution to get pre-qualified for a regular mortgage.
You might also schedule a meeting with a fee-only financial planner to run some projections for you with more information such as your TSP balance, your projected FERS pension in order to see how long your retirement funds will last. They could also model cash flow for you to see if you will benefit from becoming a homeowner. Visit www.letsmakeaplan.org to find one near you.


#3

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