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Thread: Repaying TSP Loan

  1. Question Repaying TSP Loan

    I have a question about repaying a General Purpose Loan and then taking out a Residential Loan. I've read the TSP Loan Booklet and the IRS website. I've emailed TSP and called TSP directly, I'm getting lots of conflicting information, the information I am provided is not mentioned anywhere on the TSP site or in their publications.

    I was going to purchase some land and build on it in the future. I was going to take out a General Purpose Loan. In my hypothetical scenario, the deal fell through and I decided to pay back a 80% of the General Purpose Loan. Now that most of my loan is repaid, I find a home to purchase and would like to take out a Residential Loan. I was informed that I would not be eligible to take out a Residential Loan. The TSP representative informed me that when you pay back a loan, the repaid funds are not allocated back to the "Employee's Contributions and Earnings". They do go back to the Traditional/Roth Accounts, the funds just aren't eligible for loans. This doesn't sound accurate. There is no mention in any publications about these restrictions.

    Hopefully someone in this group has actually completed the scenario I'm going to mention...

    I understand balances change on a daily basis. For simplicity, in this example balances do not fluctuate and no contributions are added.

    Let's say my current account balance is $50,000; this includes $30,000 personal contributions and earnings and $20,000 government contributions.

    Based on the smallest of the Three Rule criteria, I fall under scenario #2, 50% of my vested balance, which equals $25,000.

    On February 1, 2019 I take out a General Purpose loan for half of my vested balance, $25,000 to purchase vacant land.

    On February 15, 2019, I decide not to buy the land and pay back $20,000.

    On March 1, 2019 my TSP General Purpose loan balance is now $5,000 and my TSP vested balance is now $45,000, plus a $5,000 General Purpose Loan balance.

    On April 1, 2019, I decide to purchase a house and would like to get a Residential Loan. Using the smallest of the Three Rule criteria, I should still fall under Rule #2, 50% of my vested balance. My balance is now $45,000, plus $5,000 in a General Purpose Loan or $50,000.

    Out of the Three Rules for a Residential Loan, this is the calculation I am getting.

    Rule #1: My contributions and earnings balance should now be $25,000. Original balance was $30,000 - $5,000(General Purpose) = $25,000.

    Rule #2: 50% of the Vested Balance minus outstanding loan balance or $10,000, whichever is greater. This should now equal $25,000.

    Rule #3: $50,000 minus your highest outstanding loan balance in the last 12 months; This rule should not apply because Rule #2 is a lesser value.

    Is it true that repaid loan funds are not allocated back to an Employee's Contributions and Earnings balance and unavailable for future loans??

    TSP Loan Booklet:

    On the IRS website, example #7 seems similar.
    Last edited by ReefGod; 01-30-2019 at 07:36 PM.


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