TSP Loan questions:

[docpanic]

Hi:

Presently I have a TSP loan, but I would like to access more of my TSP funds to pay my federal taxes. The problems are:


I don't have the cash to pay off the TSP loan.
My credit rating is trashed following my expensive divorce.
Ideally, I would like to borrow the money to pay back the TSP loan and then pay back within 90 days after I have obtained a TSP loan that accesses my available equity.
Any ideas about any resources that someone in my position can utilize to solve this problem?

Thanks,
Doc

[JTH]

Don't worry, it's a new governement and paying your taxes are only required if you want to work directly for the president. :D

Seriouly though. I'd highly advise against using your longterm investment to pay off the feds for the short-term.

Perhaps you can get an extension or set up a payment plan with the IRS?

Best of luck and welcome to the forum.

[docpanic]

Thanks, JTH.

I certainly do understand about not using retirement funds for short term debt, but it appears now that I am paying myself more than my account is making due to the recent market downslide. My plan is to enter into a payment arrangement with the IRS if I cannot find a faster solution. It's just that right now, it seems to make sense to pay myself around 3% versus paying the penalties and interest the IRS may want.

I still need to know if any one has any ideas about how I might borrow funds to pay back my TSP loan in the short term so I can access those extra funds that are now available to me?

Thanks all in advance.

[DCguy]

if you get a loan from a bank, you pay them interest with your money after tax. if you get a loan from tsp, you pay yourself interest with your money after tax. I think the market's not gonna recover in the next 6 months.

[Scout333]

Doc, What type of loan do you currently have with TSP? I believe you can have one general purpose and one residential loan at the same time. Also, I believe there is a 60 day restriction once you repay a loan before you can take out another of the same type. Sounds like you are talking about a general purpose loan for which a 60 day delay would screw up your plan. Residential loans are for house purchases.

Suggest going to the TSP site and carefully review the frequently asked questions re loan program. Good luck!

[docpanic]

I know about the 60 day period. I was hoping to delay filing my taxes and then present the full payment when I have the loan situation figured out. The bigger deal is that I don't want to mess up the offer in compromise that I recently submitted. They want you to stay current in order to continue evaluating the offer. I am hoping that "current" can be adjusted to a later filing date.

[Scout333]

Good luck with the OIC. I understand those can be really tough to get approved. An extension might get you by for a few months but it is really only an extension to file not to pay. Don't know if that qualifies as being current or not for OIC purposes.

[wv-girl]

I know about the 60 day period. I was hoping to delay filing my taxes and then present the full payment when I have the loan situation figured out. The bigger deal is that I don't want to mess up the offer in compromise that I recently submitted. They want you to stay current in order to continue evaluating the offer. I am hoping that "current" can be adjusted to a later filing date.
It has been my experience that you can delay the filing of your taxes, but they still want the estimated $ owed on April 15.:(

[GUCHI]

i heard that ypu vcan borrow money from your own CSRS TSP Account for other than a primary residence or debt consolidation. ie vehicle loan ??? can anyone shed some light on this ??? I relieze that now is a very bad time to pull money from my account, but i'm just getting the facts now to make a move later.

thanks MB

[Scout333]

You can get a general loan with repayment period up to 5 years. Look on the Thrift Savings Website under TSP Features and select TSP Loan Program. There are a number of links for information on the program. Whether or not its a good idea that's another question entirely.

[GUCHI]

scout
thanks 4 the info.

guchi

[felixthecat]

I have a question...I'm planning on buying a new house and then sell my old one within 90 days. There is a period between 30-90s days where money will be tight carrying two mortgages. I was thinking about taking a 50,000 TSP loan out...which will cover the payoff of the old home (37,000) and the rest to bridge the gap for making payments on the new house including any repairs that might need to be made. After selling the house...I will use the tax free sale of residence money to pay back the TSP loan in one swoop. If I'm doing this right in my head, I should not have to use my salary taxed paid dollars to back back the loan after I get the old house sold. I will have to pay taxed dollars from my salary in the meantime. One thing for sure...I want to pay back the TSP loan as quick as I can.

What is flawed in my thinking? Can I do what I'm thinking? Does this seem logical temporary buffer between the buy/sale of new/old home? :worried:

Part of going this route is that I also need to time to move my house content to the new house. I know this would be alot of effort and aniexty. I just want to make this a smooth transition.

I'm needing your help guys and gals!

[KevinD]

What if the first house doesn't sell in 90 days? :worried: :sick:

[felixthecat]

I have cash reserves that would last a year if necessary. I have two possible rentals as well...one one would have to be rented for the gap to be closed. I'm also upside on equity about 100,000 even before moving into new house.

[Frixxxx]

Although not the best way to go about doing this sort of transaction, the two flaws would be:
1. Not selling the house timely
2. That money not working for you while it is out of the market.

But, if you feel comfortable spending the $50 dollars and covering the payments while you're waiting for the sale, it really comes down to 'HOW LONG'?

Remember, as soon as you take a loan, the money starts coming out of your pay!

[jimijr]

Right, the loan must be repaid from salary. I believe that's the only way money can get into the account.

I would argue strongly against any TSP loan unless absolutely necessary, like for bail or for an operation. I took out a loan in the 90s. In effect it moved my entire account to the right four years on my graph. I coulda used those years as I retire on Dec 31 this year.

[pokerstar629]

Right, the loan must be repaid from salary. I believe that's the only way money can get into the account.

Not true, you can pay the TSP back anytime with a personal check for the entire balance if you want. You do have to wait 60 or 90 days (I forget) before you can take another loan out.

[pokerstar629]

I have a question...I'm planning on buying a new house and then sell my old one within 90 days. There is a period between 30-90s days where money will be tight carrying two mortgages. I was thinking about taking a 50,000 TSP loan out...which will cover the payoff of the old home (37,000) and the rest to bridge the gap for making payments on the new house including any repairs that might need to be made. After selling the house...I will use the tax free sale of residence money to pay back the TSP loan in one swoop. If I'm doing this right in my head, I should not have to use my salary taxed paid dollars to back back the loan after I get the old house sold. I will have to pay taxed dollars from my salary in the meantime. One thing for sure...I want to pay back the TSP loan as quick as I can.

What is flawed in my thinking? Can I do what I'm thinking? Does this seem logical temporary buffer between the buy/sale of new/old home? :worried:

Part of going this route is that I also need to time to move my house content to the new house. I know this would be alot of effort and aniexty. I just want to make this a smooth transition.

I'm needing your help guys and gals!

I think you should take out the TSP loan and pay off your existing home loan and buy your new property at these low prices. Rent out the paid off home and use the money to pay back your TSP loan. When home values come back up, then you can consider selling it. It's a buyers market, buy low, sell high.

I live in southern California, and I just bought a 1200sf, 3 bedroom rental for 50K! I'm renting it out for $800/month, it will pay for itself in less than 6 years and I will have an income stream for as long as I hold it. Hope this helps you. :)

[Frixxxx]

Not true, you can pay the TSP back anytime with a personal check for the entire balance if you want. You do have to wait 60 or 90 days (I forget) before you can take another loan out.
Pokerstar,

You have to be in pay status to take a loan, but you can repay early as you say. If you are not in pay status then it is considered a withdrawal. You can only have one loan at a time with TSP.

Please refer to https://www.tsp.gov/PDF/formspubs/tspbk04.pdf
for more answers.:cool:

[pokerstar629]

Pokerstar,

You have to be in pay status to take a loan, but you can repay early as you say. If you are not in pay status then it is considered a withdrawal. You can only have one loan at a time with TSP.

Please refer to https://www.tsp.gov/PDF/formspubs/tspbk04.pdf
for more answers.:cool:

Forgot to mention that the original loan must be paid off before you take another one, thanks Frixxxx!

[felixthecat]

Thanks for all of your advice. I'm still planning on going the route of paying off the existing home if we get a contract on the new house. Then, using the rest for any possible issues with the new house. I will then sell the old house in 90 days. Houses have not fallen in price here...so the house should sell in a timely manner. In the meantime, we will rent the smaller house on the newer property to help pay the mortgage during the tight 90 days. The equity in the new house is too substantial to overlook. It is a very unusual short sale with huge potential. I will discuss it further when and if the contract is written. I also have the old house for possible rent if I can't sell the old house within the required period. My aim is to pay back the TSP loan quick. You can do that by sending in a check. This was discussed in another post. It is true..you can and I will do this. :D

Like they say, no risk no reward. Or was is Birch that coined that phrase? :blink:

[pokerstar629]

Thanks for all of your advice. I'm still planning on going the route of paying off the existing home if we get a contract on the new house. Then, using the rest for any possible issues with the new house. I will then sell the old house in 90 days. Houses have not fallen in price here...so the house should sell in a timely manner. In the meantime, we will rent the smaller house on the newer property to help pay the mortgage during the tight 90 days. The equity in the new house is too substantial to overlook. It is a very unusual short sale with huge potential. I will discuss it further when and if the contract is written. I also have the old house for possible rent if I can't sell the old house within the required period. My aim is to pay back the TSP loan quick. You can do that by sending in a check. This was discussed in another post. It is true..you can and I will do this. :D

Like they say, no risk no reward. Or was is Birch that coined that phrase? :blink:

I usually steer away from short sales, they typically take 3-6 months to sell, the seller and the bank must agree on the selling price.....Good luck on your home purchase. ;)

[felixthecat]

Yes, normally short sales are lengthy. However..the bank wants to close the book on this property so they are eager to move on it. We shall see. I will probably lock the rate as mortgage rates have bottom. :D