Using Retirement Funds for Down Payment on Home

Should I withdraw money from my IRA for a down payment on a new home? The stock market's been underperforming, but I'm optimistic about long-term home values.

Share on facebook
Share on twitter
Share on pinterest
Share on print
Share on email

In the first place, the question of whether the stock market’s been flat while real estate has growth potential is irrelevant unless you’re planning to buy this home for investment purposes. This is an issue you need to think through very carefully. An investment is something you make for one of two purposes: either you expect it to generate income, or you hope that it will appreciate in value so that you’ll be able to sell it for a profit. Generally speaking, people don’t buy homes for either of these reasons – they buy them because they want to live in them. If this is your situation – and we’re assuming it is – then you’d be wise to avoid jumping into a purchase of this magnitude simply because of the supposed investment advantages.

In the second place, you need to know that withdrawing money from an IRA account for a down payment is likely to have a couple of very serious economic results. For one thing, you will lose the almost “magical” benefit of compounding interest on a tax-deferred basis. For another, there may be significant tax consequences that might offset the benefit of borrowing from yourself. It would be far better to leave the money in the IRA and find some other way to come up with a down payment.

As you begin moving in this direction, remember that lenders have historically required a down payment of at least 20 percent of the purchase price of a home. In recent years, as housing prices increased and lenders became more aggressive, many financiers began accepting down payments of as little as 3 to 5 percent. We now know that this was a disastrous policy. The best plan is to put down as much money as possible toward the total cost of the house at the beginning of the buying process. This will reduce your monthly payments and shorten the term of your home loan. Of course, it may also mean disciplining yourself to save until you have enough cash on hand to take such a decisive step – but then we’re of the opinion that saving is always a good idea.

For additional help and information on this topic, we’d encourage you to consult the resources and referrals highlighted below. Or if you have relationship concerns and challenges associated with this situation, please don’t hesitate to give our Counseling department a call.


Related Video
Is Your Home Really an Investment?: Ron Blue discusses the myths and realities of residential real estate as an investment.

If a title is currently unavailable through Focus on the Family, we encourage you to use another retailer.

Complete Guide to Faith-Based Family Finances

Your Money Map: A Proven 7-Step Guide to True Financial Freedom

The Total Money Makeover: A Proven Plan for Financial Fitness

How to Manage Your Money: An In-Depth Bible Study on Personal Finances

The Treasure Principle

Family and Personal Finances (resource list)

Crown Financial Ministries

Dave Ramsey

Debt-Proof Living

Kingdom Advisors

Money and Finances

God’s Big Idea About Finances

Share on facebook
Share on twitter
Share on pinterest
Share on print
Share on email

Thank you [field id="first_name"] for signing up to get the free downloads of the Marrying Well Guides. 

Click the image below to access your guide and learn about the counter-cultural, biblical concepts of intentionality, purity, community and Christian compatibility.

(For best results use IE 8 or higher, Firefox, Chrome or Safari)

To stay up-to-date with the latest from Boundless, sign up for our free weekly e-newsletter.

If you have any comments or questions about the information included in the Guide, please send them to [email protected]

Click here to return to Boundless

Focus on the Family

Thank you for submitting this form. You will hear from us soon. 

The Daily Citizen

The Daily Citizen from Focus on the Family exists to be your most trustworthy news source. Our team of analysts is devoted to giving you timely and relevant analysis of current events and cultural trends – all from a biblical worldview – so that you can be inspired and assured that the information you share with others comes from a reliable source.

Alive to Thrive is a biblical guide to preventing teen suicide. Anyone who interacts with teens can learn how to help prevent suicidal thinking through sound practical and clinical advice, and more importantly, biblical principles that will provide a young person with hope in Christ.

Bring Your Bible to School Day Logo Lockup with the Words Beneath

Every year on Bring Your Bible to School Day, students across the nation celebrate religious freedom and share God’s love with their friends. This event is designed to empower students to express their belief in the truth of God’s Word–and to do so in a respectful way that demonstrates the love of Christ.

Focus on the Family’s® Foster Care and Adoption program focuses on two main areas:

  • Wait No More events, which educate and empower families to help waiting kids in foster care

  • Post-placement resources for foster and adoptive families

Christian Counselors Network

Find Christian Counselors, Marriage & Family Therapists, Psychologists, Social Workers and Psychiatrists near you! Search by location, name or specialty to find professionals in Focus on the Family’s Christian Counselors Network who are eager to assist you.

Boundless is a Focus on the Family community for Christian young adults who want to pursue faith, relationships and adulthood with confidence and joy.

Through reviews, articles and discussions, Plugged In exists to shine a light on the world of popular entertainment while giving you and your family the essential tools you need to understand, navigate and impact the culture in which we live.

Have you been looking for a way to build your child’s faith in a fun and exciting way?
Adventures in Odyssey® audio dramas will do just that. Through original audio stories brought to life by actors who make you feel like part of the experience; these fictional, character-building dramas use storytelling to teach lasting truths.

Focus on the Family’s Hope Restored all-inclusive intensives offer marriage counseling for couples who are facing an extreme crisis in their marriage, and who may even feel they are headed for divorce.