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Foreclosures
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Avoid Losing Your Home to a Bank Foreclosure
by
Daniel Lamaute
Are
you facing the prospect of losing your home in a bank foreclosure?
Many who are experiencing a temporary financial squeeze will
withdraw cash out of their IRA in order to save their home.
Getting a loan from your retirement account may be a smarter
way to go than taking an IRA distribution.
As with most people your home and retirement savings probably
represent the bulk of your available assets. However, withdrawing
money from your retirement accounts, even if it's to protect
against a froeclosure, will cause you to lose a big part of
your retirement money to taxes. A better strategy is to take
money out of your retirement funds by way of a 401k loan.
A loan from a 401(k) doesn't trigger any distribution taxes
and avoids the 10 percent early withdrawal penalty, as long
as you repay the loan.
When you have a job you generally can get a loan from your
employer's 401k plan. But once you leave or lose your job,
as a rule, you can no longer keep your 401k loan or borrow
from the plan.
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Also
read:
• What
is Foreclosure
Many of us have heard the term foreclosure in relation
to other individuals and understand that it is not a
pleasant term, but do not have a firm grasp on what
it actually means. Before we go any further in discussing
the profit potential available through foreclosures
it is critical that we define the term foreclosure.
•
Financial
Difficulties. How To Save Your Home
People who have financial difficulties may find themselves
in a situation where they know they can't continue making
their mortgage payments. If that happens to you, come
up with a game plan before you become delinquent.
•
Foreclosure
Basics
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You may, however, be able to start your own individual 401k
plan, called a Solo 401k or Self-employed 401k under new tax
laws that became effective in 2002. The paperwork to set up
a Self-Employed 401k is easy. You can also transfer any of
your IRAs, 401k, SEP plan or other qualified retirement funds
to your Self-Employed 401k plan. Most Self-Employed 401k plans
allow you to borrow up to 50 percent of your account balance
all the way up to $50,000. The 401k loan is tax-free and penalty
free.
With a lingering recession, anemic job market, and rising
property taxes and fuel bills, experts predict that many more
people will default on their mortgage payments and face bank
froeclosure action. Small business owners and contract freelancers
are especially vulnerable to the economic slump.
The Self-Employed 401k is a qualified retirement plan that
can be set up by anyone who has a part-time or full-time business.
This retirement plan is similar to 401k plans of large companies.
The difference is that the Self-Employed 401k is designed
for an individual and as such is less complicated and less
costly to maintain. Any person with a business with no employees
can set up a Self-Employed 401k plan.
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Also
read:
• Bank
Foreclosures Profitable Investment
Several people, especially those new to real estate
investing, will prefer bank foreclosure to any other
form of property buying because they think that they
are safe to buy. Their understanding is that the bank
owns the property and therefore they are free from all
liabilities and other negative encumbrances. Though
a bank forclosure can be safe, the bank never owns the
property. The property has only been pledged as collateral,
meaning in the event of default of loan payment, the
property should be disposed to redeem the loan.
•
Real
Estate Investing and Foreclosures
• What is a Lien
• Florida foreclosure statutes
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The
cost and features of Self-Employed 401k plans will vary depending
on the plan vendor. A typical plan will cost less than $200
a year to maintain and allow loans with terms of 5 years or
more at an interest rate close to prime rate. The good part
is that all of your loan payments including the interest go
back to your 401k account. Take caution, however, because
not paying your 401k loan on time will trigger IRS tax consequences
as if your loan was a taxable distribution.
For more information or to obtain a Self-Employed 401k visit
InvestSafe.com.
About the Author
Daniel Lamaute is a retirement plans expert. Through www.investsafe.com
his firm Lamaute Capital provides retirement tax saving tips
to individuals and organizations.
• California foreclosure
• Florida foreclosures
Also
read:
•
Buy a foreclosure and save big
There's not many things more discouraging than calling
a real estate agent, giving them your financial information
and filling them in on what type of home you'd like to
buy for the price range you are comfortable with, then
seeing the look on their face and explaining to you what
you can really afford. While most people give in and settle
for much less, many others find a market that will allow
them to purchase homes below or well below what the market
dictates. |
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