Can I borrow from my IRA to purchase a house

Feb 19, 2008 1 Replies
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Or - Should I borrow from my IRA to purchase a residence?



I have $44,000 in my IRA and I'm about to purchase my first residence (a condominium). Can I borrow from my IRA, pay interest to my IRA and deduct that interest?



I'm already putting about 30% down on a $280k purchase. I can get a mortgage at 5.5%. If I borrow from my IRA, I can pay 7.5% interest to myself. Is this deductible? Should I take out a larger mortgage or borrow from my IRA? If I were not paying to myself, it seems like a poor choice.


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You CANNOT borrow money from your IRA, for ANY reason. To do so would be a prohibited transaction and be deemed as a total distribution of the IRA, subject to tax and early withdrawal penalties.

You CAN, however, use/withdraw up to $10,000 to acquire a "first residence", which would be taxable but not subject to the early withdrawal penalty. This a lifetime limit for this exclusion. See IRS Pub 590 for additional detail.

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