I have been wanting a garage/shop with a concrete floor for the last 20 plus years, miss the one I had when living in the city. Really hate to take on the debt but figure if I wait too long I will be too old to use it. Talked to Farm Credit but a adjustable rate scares be on a equity line of credit. Called several other banks and they all do adjustable rates. We have looked at a few buildings that builders have done and while looking at one the guy volunteered the information he borrowed from his 401K, something I never thought of and it worries me to loose the money it makes while repaying it. Probably strange thing to be asking strangers financial advice but sometimes other people point out things a person overlooks.
Would you borrow to build a garage?
- Thread starter tom4018
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TexasBred
Well-known member
You shouldn't lose any of the earnings from the 401-k. You'll just be paying interest on what you owe but your 401-k will continue to earn/lose just as it does now. No different than borrowing against a CD.tom4018":5oo4h4m7 said:
JMJ Farms
Well-known member
I can't tell you whether or whether not to take on the debt. I can tell you this. Interest rates are gonna rise. Now is a good time to borrow. But only do it on a fixed rate. Second, if you can afford it and it's not going to break the bank, go for it. We are not garaunteed tomorrow.
Jogeephus
Well-known member
Borrowing from yourself sounds like a good idea to me. Besides, wouldn't you be increasing the value of your home? And there is a lot of money saving things you can do in a garage. I wouldn't have a problem with it myself. Its not like you are borrowing money to go buy lottery tickets.
Kingfisher
Well-known member
Heck you can borrow the material interest free at times from Home Depot. How big a garage are you talking about ?
farmerjan
Well-known member
If you can get it interest free from home depot or something then it would be good; except how long would the no interest be for? If you can borrow against the 401k that would be the best bet. It is borrowing against yourself, all you are really paying is the interest at a fairly low rate and yeah, interest rates are gonna rise. Besides adding the value n to your house/property/farm, and giving you a place to do what you have wanted for 20 years, you are not going to be taking all your money out of the 401k all at once when you retire, so should not affect your retirement that much. What is it earning in interest right now anyway? I lost 1/2 of what I had in the 2008 disaster, and when I got it back to where it was, transferred nearly all of it to very safe investments that earns about 2- 2 1/2 %. Didn't have alot to start with, and with inflation, basically am not getting anywhere, but can no longer lose it on the stock market ( we have limited choices of investments through work). If you can borrow against it at a low rate, and it is earning less than that, then the only real interest you are really paying is the difference. If by some freak chance the rate of return goes up and you are locked into a set payback interest, you will actually be making money. Don't expect that to happen but.....
yakker
Active member
I don't know where your at finacially, but if your in decent shape financially I would do it in a heart beat. I was in that situation for about 10 years and it sucked. I waited so I didn't need a loan, would never do that again. But then again I like to work on stuff during the winter and without that i couldn't do much. Now I got a 3 car garage and 48x60 shop to mess around in! :banana: Fixed rate ONLY, they got to have some good interest rate ones today????
No. Definitely not with an adjustable rate... ARM... housing collapse... remember all that. Also, If you lose your job that 401K loan becomes due immediately. If you can not pay it you will pay a penalty and taxes on it like income which is the equivalent of taking a loan with %20+ interest, depending on your tax bracket.
1982vett
Well-known member
What brute said.....
Brute is correct. Sounds correct borrowing from 401K. No application or getting approved by financial organization, but "IF" you were to get laid off, you would get a 1099R for the balance, which is fully taxable in that year. After adding to your ordinary income it could put you in a higher tax bracket plus not having your savings left to fall back on. If you really want it borrow the money and pay the note. It will add to the value of your real estate, and if you get to a point that you can't make the note, then you can draw on your 401K to pay it off.
Rafter S
Well-known member
I don't borrow money, period. If I can't pay cash I do without, so my answer would be no.
Rafter S":1klyqnih said:
Same here 100%. If I can't pay in cash, I do without. That's probably why my farm looks like Green Acres and not like most of the modern ones I see, but I like having no payments better than i like having stuff.
herofan":1nrsg4ll said:
:nod: Agree 100%
Ryder
Well-known member
I agree with these three.
Borrow for absolute necessities if you have to or for something that will make you more money.
Otherwise if you can't pay cash, then you can't afford it.
Borrow for absolute necessities if you have to or for something that will make you more money.
Otherwise if you can't pay cash, then you can't afford it.
wbvs58
Well-known member
Whether you borrow or not I think depends on how many years you got left to work. You don't want any debt going into retirement but if you got a few years left and it is something that is going to be an asset to you then why not. I reckon a bit of debt always keeps you honest and working.
Ken
Ken
hurleyjd
Well-known member
You might check and see if your insurance company loans money. My Son manages three credit unions and has been pretty competitive with interest rates. He lined up a couple for money for home improvement and had the loan approved. The state farm agent offered them a lower rate and they went with state farm.
hurleyjd
Well-known member
Around here you can have a shop building put up for about 13 dollars a square foot.
