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If you need a property loan, the first place you should look is your own assets. Your IRAs, 401(k) accounts, stocks and insurance policies can be ready sources of cash. Use these resources to purchase your primary residence and you won't be hit with a penalty. Or, take a penalty for early withdrawal and turn a quick profit to more than make up for the initial loss. Self-directed IRAsYou can go to a bank, and through an IRA, buy and hold real estate. Banks require only that the property be purchased outright. IRA funds also can cover repairs on property held within the IRA. Just be aware that property taxes paid from an IRA account are not deductible. And, of course, you can take a short-term distribution, subtracting federal withholding tax, from your IRA. The trick here is to roll the amount back within 60 days to avoid those severe early withdrawal penalties. But IRA rules are complex, so check with your tax adviser and the bank itself before you use your funds to purchase property. 401(k) fundsThis is one of the best options to tap into because you can borrow up to 50 percent of the value of your fund with a limit of $50,000. And depending on the plan, you may get up to 15 years to repay. If you are using the funds to purchase a home, you may not have to pay the penalty usually exacted when you withdraw money from this fund before you reach age 59 1/2. One of the things to remember when you are borrowing from your IRA or 401(k) stock accounts or other retirement funds is that the money actually belongs to you. You are using this money now for a long-term, profitable career that will serve you well in the future. Insurance and stocksAnother source is the cash value in a whole life insurance policy. All you have to pay back is the interest. If you don't repay the principal, the loan is deducted from the face value of the policy at payout time. You can tap stocks for cash without selling them since banks will usually loan up to 75 percent of the value of a publicly traded stock. Repayment is usually over five years at a rate pegged to the prime rate. So the next time you need a property loan, before turning to a bank or other lending institution, try looking in the mirror and borrow from yourself. You won't get hit with high interest rates and you can maintain your good credit score. Remember that you may have to take a penalty for early withdrawal. Terms401(k): This is a retirement investment plan in which you can set aside a certain percentage of your paycheck, pre-tax, to an account set up by your employer. IRA: Another investment plan that allows you to build interest on your IRA earnings that won't be taxed until withdrawal. Whole life insurance: A plan that provides life insurance benefits for your entire lifetime. The costs are higher than term insurance, but you can generally build up more equity with whole life and can borrow against it. Stocks: Actual shares of ownership in a company that you purchase via one of the leading stock exchanges--NYSE or NASDAQ.
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