How to Get an IRA Loan to Avoid Foreclosure

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By eHow Contributing Writer

Article Rating: (9 Ratings)

You can't get a loan against an IRA, but you can withdraw funds from it. It doesn't take that much work to make an IRA withdrawal to avoid foreclosure; just a few telephone calls and a little bit of paperwork. Here's what you need to know when borrowing against your IRA account.

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Difficulty: Moderate

Instructions

Things You'll Need:

IRA plan details
Foreclosure paperwork

Step 1

Withdraw the amount of past-due mortgage payments you owe to get your home out of foreclosure status. Financial institutions generally place restrictions on withdrawals, so be sure to check your IRA paperwork to know which restrictions might apply to your account.
Step 2

Apply for a hardship withdrawal. In times of financial difficulties, such as foreclosure, the loss of a job or for payment of medical bills not covered by insurance, you are allowed to withdraw up to 100 percent of the vested dollar amount in your IRA.
Step 3

Understand the rules for hardship withdrawals. When you take a hardship withdrawal to prevent foreclosure, you will not be subject to the 10 percent tax penalty, but you won't be allowed to make contributions to your account for 6 months.
Step 4

Grasp the restrictions of regular withdrawals. If you don't need to withdraw all of your IRA funds to prevent foreclosure, you won't have to pay the 10 percent tax penalty as along as the full amount of the withdrawal is deposited again in your IRA within 60 days.

Tips & Warnings

Be prepared to produce copies of your foreclosure paperwork. The financial institution maintaining your IRA and the IRS will request a copy as proof that you meet their hardship qualifications.

Resources

Visit Retirement Planners to learn more about IRA withdrawals.

Comments

cpachicago said

Flag This Comment

on 9/8/2008 This article is DEAD WRONG! Hardship distributions for penalty avoidance do NOT exist with an IRA. You will pay a penalty if you take a distribution from an IRA to pay your mortgage - even in the event of foreclosure. Readers should be leery of an article when the title is about getting an IRA loan and the first line in the article states you can't get a loan. You can not get a loan on an IRA. PLEASE PLEASE consult your tax advisor before withdrawing funds from an IRA!!