Pros and cons of using a Roth IRA to fund your home purchase

There ain’t no pros…

but it’s an interesting read. Saving for retirement is saving for retirement, it’s not to be diverted for other purposes. It may be rationalized as a good idea when buying a house, but can have long-term serious negative consequences for retirement.

A Roth individual retirement account is often cited as a way to save for your golden years. It could  also help you buy a house. In a nutshell, up to $10,000 in earnings can be withdrawn from such an account — free of both taxes and penalty — for a home purchase if you meet certain requirements. That’s on top of the ability to withdraw your direct contributions at any time, because you already paid taxes on that money.

As home prices continue their upward trajectory, the amount of cash needed to purchase one continues to rise as well.

While it’s possible to buy a house with less than 20% down — the average is 12% overall and 6% for first-time buyers — going that route also might mean paying private mortgage insurance, or PMI, until your equity is at least 20% of the home’s value. PMI can run $30 to $70 monthly for each $100,000 borrowed, according to Freddie Mac.

Source: Pros and cons of using a Roth IRA to fund your home purchase

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