borrowing thrift for a home.

[akg4y]

Regarding paying back the loan with 'After tax' dollars, the only 'after tax' payments you are really making is the interest on the loan. The principal, lets say $10k, is being paid back with the SAME 10K you were given as a loan.

The fact that the interest is being paid with after tax dollars is really inconsequential, because ANY loan you get would be paid back using after tax dollars.

The real question is simply, is your expected rate of return in the TSP better than any expected savings you get by taking the loan out from the TSP rather than from another source. If the TSP loan is your only method of securing a home, then of course the amount of savings is secondary to how much you want a home.

 

[Frixxxx]

Regarding paying back the loan with 'After tax' dollars, the only 'after tax' payments you are really making is the interest on the loan. The principal, lets say $10k, is being paid back with the SAME 10K you were given as a loan.

The fact that the interest is being paid with after tax dollars is really inconsequential, because ANY loan you get would be paid back using after tax dollars.

The real question is simply, is your expected rate of return in the TSP better than any expected savings you get by taking the loan out from the TSP rather than from another source. If the TSP loan is your only method of securing a home, then of course the amount of savings is secondary to how much you want a home.

Gotta side with you on this one, especially in today's economy, If I take a loan to get a better interest rate or rate of return on my money (which is negative), then take the loan.

I've been trying to put a spreadsheet together to try and figure this out based on the comments I've read here and on other posts. If one takes out $50K to save on principal on a loan, then time is your nemesis. I'll try and post the spreadsheet once I work it out!

 

[Frixxxx]

..... I'll try and post the spreadsheet once I work it out!

Ok, using the numbers that I recieved here, let's figure this out:

$180,000 for home
Assuming 6.5% Loan 30 years
Interest paid total=$229,581.89
$50,000 loan
Assuming 6.5% Loan 30 years
Interest paid total=$63,775.10

TSP Loan $50,000
Assuming 3.375 %
Paid back in 3 years
Interest paid total=$2,644

Now, if in that three years your money is not working for you:
$50K out
at 10% a year
55000 balance first year
66000 balance second year
72600 balance third year
total interest lost $17,600

Total cost = $20,244 over 3 years

So to save the interest on 63K costs 20K you can say that you saved 40K.

But time is your nemesis. That $20,200 isn't working for you. Over that 30 year period your would be trying to save (at an avg of 10% a year) the remaining 27 years means that $17,600 would have turned into ~$80K.

So, based on that, what you are you doing with the money you are not paying into a house, you might want to funnel away some into another money-making venture to recoup that 80K. With the three year delay it may only get to $68K. So you really lose another 12K on the back side.

Alot to consider, makes my head spin!

Also, if you're like me, you have lost a little of the yolk in your nest egg. Might want to put what's left to work for you NOW!!!!

I suggest a good Roth or Money Market fund!

 

[aelizabeth]

Does anyone have any idea how long TSP takes to disburse proceeds? I faxed my application along with direct deposit for a residential loan. I'm nervous b/c my close date is in 3 weeks and I cannot move it.

 

[ATCJeff]

Does anyone have any idea how long TSP takes to disburse proceeds? I faxed my application along with direct deposit for a residential loan. I'm nervous b/c my close date is in 3 weeks and I cannot move it.

From the TSP website:

When can I expect to receive my money?
Generally, it takes several weeks from the time the TSP receives all of your information until you (or your financial institution) receive the money for your loan. You may get your money in less time if you can complete your request on this Web site.

The TSP will mail your check to the address on file with the TSP. If your address has changed, please ask your agency to update the address for your TSP account before you apply for a loan. If your check is lost in the mail, it can take 6 weeks or longer to replace it.

You can choose to have your money deposited directly into your checking or savings account by electronic transfer of funds (EFT). For security reasons, if you would like to have your loan payment sent by EFT, you will not be able to complete your entire request on line. EFT deposits are safer, more convenient, and usually faster than checks. EFT deposits can be made only to financial institutions in the United States.