TSP Loan to Fund Investment Property

9 Replies

Hey all,

I'm looking into pulling a loan out of my TSP account in order to make the down payment on a duplex I just got under contract. A few questions...

1. Does the interest rate I pay go back into my TSP account? If so, the only costs of the loan will be the upfront admin fees, correct? (My TSP is a Roth)

2. Is the loan due if I transition out prior to the loan being paid off?

Thanks in advance. 

@Bo Goebel I'm doing the same thing right now in arlington - let's connect.

First, yes, all the interest is at the G rate and goes back to your TSP account. You're paying yourself back with interest.

Second, also yes. If you separate before repaying, you owe the remainder within 60 or 90 days (don't recall the time exactly).

@Wes S.

Thanks for the info. I look forward to hearing about your project. If you ever need somebody local just to take a look at something...please don't hesitate. 

@George Blower

Thank you for the references. The TSP book pdf is a great reference...

Is the duplex in Arlington?

@Bo Goebel - Brilliant! I had not considered borrowing from my TSP for a down payment - thank you for posting your question - it just gave me an option I didn't even realize I had.

Just for that, I'll see if I can get the Navy guys to layoff a bit at the next football game! 

Cheers!

Remember to factor in the TSP loan payment in your calculations. I think its like 414 per paycheck biweekly on 50,000 over five years. 828 a month is a nice chunk of change on top of your new mortgage payment.

Originally posted by @Michael P. :

Remember to factor in the TSP loan payment in your calculations. I think its like 414 per paycheck biweekly on 50,000 over five years. 828 a month is a nice chunk of change on top of your new mortgage payment.

I've looked into using my TSP as well, but that $800+ month is a lot of money. Even if you plan to refinance and pay the money back, you still have to be able to afford that payment for the 6-12 months.

It might still make sense for the right deal. You could just use $38k for the deal and hold the remaining $12k to make the payments over 12 months. 

It would have to be a smoking hot deal though because most people do not consider the potential opportunity cost of pulling a loan from their retirement account. For example the C Fund returned 21.82% last year, but if you would have done this you would have only made 2.33%, and that from money you had already earned. Not accounting for the timing of payments that is roughly a $9000 difference in your TSP. Compound that over 20 or 30 years and factor in that, in the case of a Roth, you will never pay taxes on it. Compare that to whatever you invested in, which you will likely have to pay a lot taxes on and it often times doesn't make sense.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.