Financing in Huson>Question Details

Steve Roy, Real Estate Pro in Huson, MT

Can I move money from my IRA to refinance my home and aviod paying taxes on it?

Asked by Steve Roy, Huson, MT Thu Feb 11, 2010

I have lost my job and need to refinance to lower my house payments while I am starting a small buisness. I have invested in IRA's in the past but have lost faith that these are the way to go. I would like to reinvest the IRA money into my primary home but would like to avoid paying taxes on the money.

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I have to agree with Mr. Mishra. Your IRA is not performing well now because it's buying stock at a lower price. When the market goes up, your investment will go up. Then it will go down again (you want it to go down). Again, the investment will pick up stock low and sell high and on and on. I would NEVER take money out of an IRA to put into a house that could burn down to the ground the next day and you lose all equity and your retirement. You will get hit with penalties and early withdraw fees and have to claim the amount as income (if it's not a Roth IRA) for next year. Consider the rule of 72: At a rate of 6%, your money will double every 12 years (72 divided by 6 is 12). So, $10,000 now is $20,000 in 12 yrs; $40,000 in 24 yrs; $80K in 36 yrs...and so on. I'd say to hold off on the small business until you can really afford it. If you're telling me that you have to lower your housing payments to open a biz, you need to get a biz partner or find a biz that's going to make more money in the forefront. Good Luck
0 votes Thank Flag Link Thu Feb 11, 2010
Real Estate Pro? You're an idiot, a house that burns down is covered by insurance.
Flag Fri Mar 1, 2013
I'm not a CPA, so you'll need to check with a CPA on the tax implications. I'll only address the real-estate specific part of your question.

You're allowed to borrow money from an IRA for certain kinds of transactions, but not for others. I don't think this is one of them, because I believe it's not an arm's length transaction.

Here's another option that you might not have considered. Use your IRA funds to acquire 1 or more properties (which don't necessarily have to be in your area) to flip/rent to increase the amount and/or yield of your IRA. You could borrow against those funds for your business venture (of course you'd have to work with knowledgeable pros [including a CPA, attorney, etc] to help you set this up properly).
0 votes Thank Flag Link Thu Feb 11, 2010
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