TSP Residential Loan Question

[jsorrell84]

Hi all.

I had a quick question that I hope someone is able to answer.

I currently own a home and plan to place it on the market within a couple of months. I found a small cottage that is in a great location that I would love to buy and move to while my big expensive to heat house is on the market. I have some family that want to rent my current house while its on the market and they can deal with the crazy heating bills lol.

I have enough in my TSP available loan balance for a residential loan plus some cash on the side to seal the deal on this little place. A thought did cross my mind though as I'm trying to debate pulling the trigger. What happens after the docs are submitted, the purchase agreement, and the loan is disbursed if for example I find I hate the little cottage lifestyle or I am unable to sell my big house and end up having to move back to it within a year or two? The cottage would have been bought and I would be in the process of repaying the loan to my TSP but it would at that point no longer be my "primary residence." Not sure what the loan agreement they send entails but I am a tad bit worried that something might go wrong and after some time it will no longer be my primary residence yet still have a TSP residential loan out on it, and there will be something in the loan agreement that causes me headaches at that point. Just trying to get all the details and make sure I don't screw myself if things don't go as planned down the road.

Any insight would be helpful!

Thanks!
-Justin

[PessOptimist]

If you haven't all ready go here:

https://www.tsp.gov/planparticipation/loans/loanBasics.shtml

here:

https://www.tsp.gov/planparticipation/loans/applyingForALoan.shtml#requestingLoan

and read this:

https://www.tsp.gov/PDF/formspubs/tspbk04.pdf

TSP loans are borrowed from your TSP account balance. If you are worried about residency, get a general purpose loan. No documentation required. You are just taking your TSP money out and if it all goes bad, no program will bail you out.

As far as I know. What happens if you fail to repay your account is in the above links.

[jsorrell84]

Thanks for the quick response :-)

I had looked at those pages already and I thought I had it all figured out but I was starting to second guess myself. I had considered the general purpose loan but the payment would be too large for cramming it down into 5 years, I'd need the payment to be lower to begin with and then I could gradually bump it up and pay it off much faster once the old house sells.

I just wasn't sure if because its my intended permanent residence, once I've bought it, moved in, and begin repaying if something goes awry, if I'd have any issues after the fact or if the fact that it is was my intended permanent residence at the time of purchase if i'd be ok.

Thanks again!
-Justin

[PessOptimist]

Got it. I wasn't thinking about the pay off time v the amount.

Someone far wiser and more schooled in the ways of TSP loans may answer. I think you should e-mail or call the TSP and ask that specific question.

I'm not helping much but I do wish you luck.

[jpcavin]

It doesn't matter if later on somethings goes wrong (lose your job, change jobs etc) that causes you to move out of your primary residence. Only matter at time of loan.

[jsorrell84]

Hey all. Thanks again for the responses :)

I ended up calling the TSP hotline the other night and asked. The guy hadn't actually heard the question before so he had to go and ask a supervisor. Just like JP said, it only matters at the time of the loan. The rep said that once the loan is disbursed, I am free to do what I need and want to do, as long as when I apply for the loan it is my intended permanent residence.

Thanks again for the help!
-Justin