withdraw from Roth IRA to buy house or take a personal loan?

[Kevin Aster Tin Obin]

I need ~$40k to have enough to buy a rental property outright without having to pay a mortgage and FEMA insurance, etc.  Should I take a personal loan, or home equity loan that requires appraisal fees etc, or cash out 40K of roth savings?  I know once I take out roth, I can't replenish it if I don't return it within 60 days.  So does that set me back more than taking a loan with interest payment?

[robartsd]

I wouldn't raid your Roth or take a personal loan to avoid flood insurance. Just get a mortgage at 75% LTV and flood insurance. If the investment doesn't work with that, it's not an investment worth making anyway.

[Sibley]

So, what happens when there's a flood and you don't have flood insurance?

[Ocinfo]

All depends on what rates you can get. In the spring I was able to get a substantial fixed rate personal loan for 5.49% (800+ credit score and $250k total income) for 3 years. I believe the rate for new loans is closer to 7% now. Basically taking the loan was the cheapest and easiest option to avoid paying too much capital gains on investment sales.

Edited to add: Many personal loan companies now explicitly state that the loans can’t be used to purchase real estate.


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