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Retirement Planning Question – Loan Payoff

 

Q: I need $10,000 – $15,000 to pay down on a land loan I have. The loan has a balance of $139,000. I need to pay some down in order to restructure the loan to get a lower interest rate and lower my payments. The interest rate on the loan is currently 7.25%. This is for a property where I want to build my retirement home. I currently own a home worth about $250,000 with a mortgage balance of $50,000. I have $380,000 in an IRA. Would it be better to get a home equity loan on my residence to pay the $10,000 or would it be better to take it out of my IRA. I will be 59 in June of this year. Thank you.

A: Thanks for your email.

There are many factors to consider here outside of the information you have provided.

It is important to know your income, monthly savings, other debt, time to retirement, risk tolerance, etc., before giving you a firm “correct answer” for you.

As a general rule we would typically advise a client to take a short term equity line loan vs. taking money out of retirement accounts and pay significant taxes, especially if it is only a bridge loan. Again, this advice may be inappropriate for you because of your other circumstances.

If you would like to talk further, I encourage you to call our office and set an appointment with one of our advisors.


 

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