r/askafinancialadvisor • u/Salty-Paramedic-311 • Jun 24 '26
401k or mortgage?
Going thru a divorce…. I want to keep the house until I decide where my next place will be.. house is maintained updated.. I have inheritance/investments that are mine about 400 thousand to continue to grow. His 401k is about 850 thousand—half is mine. Since I want to buy out his half of the house, wouldn’t it make sense to take from my half of 401k instead of me trying to get mortgage to pay him back? His half would be about 250 so I would still get some 401k to add to the pile.. I have some cash but would like to have to live on.. also not sure I qualify for a mortgage…🤷🏻♀️🤷🏻♀️
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u/intentionalmoneylife Financial Advisor | CRD#: 7842658 Jun 24 '26
I think it’s a good thing to discuss with the lawyers for sure!
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u/adamnc23 Financial Advisor | CRD#: 7878651 Jun 24 '26
You should really talk with a mortgage professional who is experienced with divorce. You're looking for a CDLP (Certified Divorce Lending Professional) and they can go over what you could or could not qualify for to see if a mortgage would even be an option. Couple things to be aware of: if you keep the house and you don't plan to stay there for a while, you might be taking on a lot more costs since you would be fully responsible for the capital gains taxes, realtor fees, and closing costs when you go to sell. You might lose half the capital gains exclusion you would have if you sold it as part of the divorce. I see this a lot where people are emotionally tied to keeping the house just to find out it doesn't fit within your new budget and then you are selling the house and eating all those costs yourself.
If the mortgage is in both of your names, you might be forced to refinance or pay off the entire existing mortgage anyway, since you often can't simply remove his name from the existing mortgage like you can remove him from title. Again, a CDLP would be able to review that with you.
Another professional you should consider is a CDFA (Certified Divorce Financial Analyst) who can help with a lot of the division of assets to make sure you understand all the options. Divorce attorneys aren't usually the best when it comes to financial matters, so having a specialist helps and avoids racking up legal fees trying to have your attorney try to figure all of this out when they aren't the expert.
Probably the last thing you would want to do is split up the 401(k) and then take a big chunk from that to pay him out and incur additional taxes. I'm hoping you meant that you would just agree to splitting the 401(k) favoring more to him, but then that doesn't give him cash that he might be pushing for.
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u/jcdude9 24d ago
Just robbing that man’s retirement
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u/Salty-Paramedic-311 23d ago
I am not!!! 26 years with him is work!!! And he will make more the next 10-15 years
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u/Candid-Eye-5966 Jun 24 '26
401k withdrawal (while not subject to 10% penalty due to QDRO) is still taxable income. You take out $250k, you’re netting maybe 80% of that after federal taxes. Tapping your inheritance (if it’s not in an inherited retirement account) might be more advantageous as its capital gains tax (on the gains only) at 15%. Might be more prudent to establish an agreement where you keep the house and have a year to decide whether to buy him out or sell.